Eric Lonergan: Hedge Fund Manager, Economist and Author

Luke Hyde-Smith (0:03)

Welcome back to the W1M Why Invest? Podcast with me, Luke Hyde-Smith. And today, we're delighted to be joined by Eric Lonergan, Macro Hedge Fund Manager, Economist, and Author.

Eric recently launched the Tyco Calibrate Macro Fund, a discretionary global macro fund at the end of July, so very recently. He also previously ran strategies at Isla Capital and M&G Investments, including the award-winning Episode Macro Fund, and was previously head of Macro Research at JP Morgan Casno.

In conjunction with this impressive investment career, Eric has written three books. The most recent is Supercharge Me, co-authored with Corinne Sawyers. Not only this, but you can keep up to date with Eric's latest views and thoughts at the Philosophy of Money blog, which he authors. So, Eric, you're a busy man. Thank you very much for taking the time to join us on the podcast today. Much appreciated.

Eric Lonergan (0:56)

Thank you for inviting me, Luke. I'm really looking forward to this conversation.

Luke Hyde-Smith (0:59)

Yeah, me too. Me too. So, thank you. So, let's get straight into it. One month in to the new fund launch. How's it been?

Eric Lonergan (1:06)

You know, exactly what you'd expect. You know, a new war in the Middle East, a semiconductor cycle virtually entirely occurred within six weeks.

Luke Hyde-Smith (1:14)

Treasury market wobbling.

Eric Lonergan (1:16)

Treasury market wobbling. Yeah, new Fed chair getting it wrong and then trying to correct course, intervention in the yen, and so it feels like a year already. I mean, the main thing is, you know, in return space, not a lot has happened in the first nearly six weeks now. But the most important thing really is that the opportunity set, I think that's emerging, which we can talk about. But I think this is an ideal environment for macro investing. It's worth saying that we launched the strategy at Calibrate with a managed account in February of last year, and I think we're up 26% since inception.

And, you know, we've got several more managed accounts, which we've signed or in the process of signing on the usage launch is really great. But the key point is, yeah, the opportunity set is huge. I mean, I think we are starting to see the seeds of a credit and investment cycle, which is AI related, which we should definitely talk about. And I think we've got right now, what is it, 2nd of September, I think we're close to the local high in the bond market. So we've kind of, I would say, got a mini panic going on in bond markets.

Which I think the market could be very, very wrong about the outlook for inflation and interest rates on a 12, 18 month view. So if I stand back as a macro investor, this to me is a great time to be launching a macro fund.

Luke Hyde-Smith (2:40)

Yeah. Interesting. I can't let you get away with a quick 26% in your managed account from launch through to current. That's been a pretty strong return. What's driven that?

Eric Lonergan (2:52)

So the way I do the numbers on this is we try to identify every trade that is generated by our investment process. And we're typically looking for 50 basis points or more of contribution from any trade idea.

And then we can measure the success rate and look at the return distribution. So we provide all of that analysis. And that's been roughly 26 discrete investment ideas have contributed 50 basis points or more to returns with something like 70% success rate, which is quite high. So that's been lots of different opportunities. Front end of the yield curve and interest rates. It's been relative value in the bond market, outright directional views in the bond market, sectoral trades within equity. So for example, we've had long positions since the funds inception in Japanese banks, which have been huge relative to the Euro stocks, which has been huge relative value performance. We've been very fortuitous in the sense of being long Korea and Taiwan, literally until they corrected or until Korea corrected, to re-engage in with Korea now. But those AI related themes within the equity space. And then currency positions, for example, in the yen, which has been very fertile.

Luke Hyde-Smith (4:07)

Anything in the resources space? I mean, over that time frame, gold's done pretty well and also had a major correction.

Eric Lonergan (4:13)

Yeah.

Mainly oil related. So we've been able to make money out of oil. I still think there are lots of opportunities. Typically, we will look at getting commodity exposure indirectly, so maybe via currencies or via equity sectors.

Luke Hyde-Smith (4:28)

Yeah.

Eric Lonergan (4:29)