According to a report on Wednesday, a budding hedge fund reaped a whopping 163% return last year by betting that rate hikes by the Fed would wreak economic havoc.
Investment manager Neal Berger’s Contrarian Macro Fund, which controls about $200 million in assets, placed bearish bets on stocks and bonds inflated by overzealous investing at a time of lax fiscal policy, according to Bloomberg.
Berger launched the company — which operates under the umbrella of his larger firm, Eagle’s View Capital Management — in April 2021 on a hunch that the Federal Reserve would make a radical turn after years of dovish policy with interest rate hikes.
“The reason I started the fund was because central bank flows would change 180 degrees. That crucial difference would create headwinds for all asset prices,” Berger told Bloomberg. “You had to believe that the awards we were seeing, to use the academic term, were Wackadoodle.”
Berger didn’t comment on the size of Contrarian’s gains, but Bloomberg obtained an investor document that revealed the 163% yield.
The Post has reached out to Berger’s company for comment.
The Contrarian Macro Fund made its huge gains by betting on stocks and bonds that were inflated by overzealous investing. NY Post Composite
Neal Berger’s Contrarian Macro Fund delivered a massive return in its first full year. Opalesque TV
Berger’s windfall came as the S&P 500 plunged 19.4% last year and other major indices fell as the Fed unveiled a series of outsized rate hikes. Investors accustomed to a stream of cheap money were crushed as borrowing quickly became more expensive, prompting many to dump assets and walk on the sidelines.
“The $19 trillion in government bonds trading at negative yields, the SPAC boom, the crypto boom, private equity and public equity valuations — these are all stripes of the same zebra,” Berger told Bloomberg .
Berger signaled that he expects the economic turmoil to continue in the near term and will maintain the fund’s short bets.
“You have your swings, your rallies day-to-day, month-to-month,” Berger added. “But by and large it all goes down.
Fed Chair Jerome Powell has indicated that rate hikes will continue this year – albeit at a slower pace than 2022. Policymakers currently see a peak above 5% for the benchmark interest rate from currently 4.25% to 4.50 %.
According to some experts, the problems in the US economy will worsen this year.
As reported by The Post, researchers at the St. Louis Fed warned last week that the risk of a nationwide recession has increased as more individual states slide into a slowdown.
Fed rate hikes have rocked the US economy over the past year. Getty Images
A total of 27 US states have already shown signs of flagging economic activity — a number that has surpassed the historical threshold at which “there is reasonable confidence that the national economy is entering a recession,” the researchers said.
Elsewhere, Michael Burry, the hedge fund boss made famous by the 2015 film The Big Short, warned this week that the US is already in a recession “by any definition”.
The head of Scion Asset Management predicted inflation will rise again as the Fed cuts interest rates to boost economic activity.