The fund is betting heavily on higher interest rates and a steeper yield curve for US debt.
Its flagship fund, Alphadyne International Fund, fell by about 10% as of July.
Alphadyne Asset Management, a hedge fund, has been one of the biggest victims of the global bond market's short run, with its $12 billion macro trading strategy fund suffering heavy losses from a series of wrong bets on rising interest rates.
People familiar with the matter saidThe New York-based investment agency suffered a loss of about $1.5 billionAs its hedge fund performance plummeted in the year to July. The company's flagship fund, Alphadyne International Fund, fell about 10 per cent. The company also manages a leveraged fund with roughly the same assets.
Alphadyne's loss-the largest publicly disclosed loss among macro hedge funds-is particularly surprising because its strategy has never suffered an annual loss since it was launched in 2006.. Macro funds rose an average of 6.8 per cent in the first half of the year, including 0.5 per cent in June, according to compiled data.
A spokesman for Alphadyne declined to comment.
The losses suggest that the sharp rise in Treasuries over the past four months has caught some of the most professional investors off guard. At a time when US inflation is at its highest level in decades, interest rates are falling, baffling bond traders around the world.
The five-to 30-year Treasury yield curve flattened more than 25 basis points in three days in June, the biggest decline since March 2020, and the spread barely widened by the end of the month. Alphadyne is betting heavily that the yield curve is steeper and slow to respond, according to people familiar with the matter.
Alphadyne's flagship fund fell 4.3 per cent in June alone, the worst monthly performance since its inception, according to people familiar with the matter, who spoke on the condition of anonymity because the information was not made public. The fund's positions are betting that the yield curve will be steeper and interest rates will generally rise.
By July, Philippe Khuong-Huu, the chief investment officer, was still reducing related positions, reducing targeted short bets and relative value strategic positions in the US and Europe, and unwinding lossmaking US bond yield curve trades, according to a person familiar with the matter. Overall, the fund fell another 2.5 per cent last month.
Alphadyne was once at JPMorgan Chase.Posts created by Khuong-Huu and Bart Broadman. According to its website, the company's investors include pension funds, insurance companies and sovereign wealth funds. In 2017, Alphadyne spun off its Asian team to create Astignes Capital Asia Pte, which focuses on trading interest rates and foreign exchange instruments in the region. Broadman is now the CIO of Singapore-based Astignes.
Khuong-huu served as Goldman Sachs in the early 2000sThe group's head of interest rates later formed Alphadyne. During his tenure at Goldman Sachs, he was a colleague of Glenn Hadden, where he traded global government bonds and US Treasuries for more than a decade and left to join Morgan Stanley in 2011.。
Hadden joined Alphadyne in 2014 and is considered one of its top fund managers, according to people familiar with the matter. Alphadyne has also recorded double-digit returns in each of the past four years.