Two Sigma China macro fund posts April loss after March drawdown

Two Sigma’s Shanghai-based Juliang Macro fund fell 0.9% in April after a 7.9% drawdown in March, the fund’s worst monthly result since its 2020 launch. The March decline followed a spike in crude oil and commodity volatility linked to tensions in the Middle East that unsettled Chinese markets and trading positions.

In a letter to investors, Two Sigma wrote that the shock produced an abrupt rally in crude and related commodity sectors while simultaneously pressuring Chinese equities. The market dislocation generated losses on both sides of the Juliang portfolio, affecting short positions tied to industrials, energy and chemicals and long positions in equity index futures.

Macro-focused hedge funds globally experienced sharp swings across commodities, equities and fixed income during the period. Several large international managers with China operations also faced performance pressure. Some managers recovered part of their March losses in April, but Juliang remained negative for the month.

Two Sigma reported the Juliang strategy has delivered annualized returns of 14.2% since inception through the end of April. The firm’s Dingliang Index Enhanced Strategy, which tracks the CSI Smallcap 500 Index, fell about 9% in March before rising 15% in April. That rebound brought the Dingliang strategy’s year-to-date return through April 30 to 23% and put it roughly 11 percentage points ahead of its benchmark for the year. Two Sigma said Dingliang has produced annualized returns of 24% since launch versus 11.7% for the underlying index.

Two Sigma expanded its mainland China presence last year, and assets under management for its local strategies surpassed RMB10 billion after additional fundraising. The firm continues to run multiple onshore strategies that produced divergent results during the recent period of market stress.

Investor communications described the recent weeks as a period of heightened volatility that disrupted positioning across global macro strategies, especially those exposed to energy, commodities and Chinese equity futures. The firm reported market-driven losses in March followed by partial recoveries in some products in April.