Two Sigma’s Shanghai Juliang Macro Fund Drops 0.9% in April

Two Sigma’s Shanghai-based Juliang Macro fund fell 0.9% in April after a 7.9% loss in March, extending a drawdown that began amid Iran-related geopolitical tensions earlier this year.

The March decline was the fund’s worst monthly performance since its 2020 launch.

In a letter to investors, Two Sigma wrote that rising tensions in the Middle East prompted an abrupt rally in crude oil and other commodity sectors while weighing on Chinese equities. The firm added that the combination disrupted positioning across its macro portfolio.

Investor communications highlighted two main sources of loss: short positions tied to industrials, energy and chemicals moved against the fund, and long positions in equity index futures lost value as Chinese markets fell. Two Sigma described the simultaneous stress in commodities and equities as a difficult trading environment for the onshore strategy.

Macro-focused hedge funds worldwide recorded mark-to-market losses as the Iran-related volatility affected commodities, stocks and fixed income. In mainland China, pressure reached other large international hedge funds operating locally, including Bridgewater Associates’ China business.

Some managers recovered part of their losses in April, but Juliang remained negative for the month.

Investor materials show the Juliang strategy has delivered annualized returns of 14.2% since inception through the end of April.

Two Sigma’s other mainland China strategy, the Dingliang Index Enhanced Strategy, which tracks the CSI Smallcap 500 Index, fell about 9% during March’s turmoil before rising roughly 15% in April. That left year-to-date returns through April 30 at about 23%.

Investor documents show Dingliang has outperformed its benchmark by about 11 percentage points this year and has produced annualized returns of 24% since launch, versus 11.7% for the index.

Two Sigma expanded its mainland China operations last year, and assets under management for its local strategies surpassed RMB10 billion after additional fundraising.