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Can Mutual Funds Invest Like George Soros?

NEW YORK (TheStreet) -- George Soros and other star hedge fund managers famously made fortunes by betting on global trends. Global macro funds can range widely, holding foreign currencies one year and U.S. stocks the next. But the macro strategy is hard to execute, and not many managers have succeeded. Most mutual funds that have tried the macro game have failed and shut their doors. For mutual funds, the strategy is particularly difficult because managers cannot use the leverage that hedge funds employ.

Now two Wall Street veterans are trying their hands with macro mutual funds, and both managers are off to strong starts. Richard Bernstein, former investment strategist of Merrill Lynch, operates Eaton Vance Richard Bernstein All Asset Strategy EARAX. Brian Singer, former chief investment officer of UBS Americas, oversees William Blair Macro Allocation (WMCNX).

In recent months, Bernstein and Singer both made a series of on-target calls. Bernstein recorded big gains with small-cap U.S. stocks, while Singer scored with Japanese equities. During the past year, Bernstein's fund returned 11.5%, outdoing 90% of its peers in Morningstar's conservative allocation category. The William Blair fund returned 13.7%, topping 97% of competitors in the multialternative category. These days the two funds are following very different approaches. Bernstein is pounding the table for U.S. stocks, while Singer is emphasizing unloved European issues.

Each December Bernstein publishes his outlook for the coming year. In 2012, he made an on-target forecast, saying that U.S. stocks would climb while the emerging markets would lag. Bernstein based his prediction on the profits picture. During the 12 months that ended in November 2012, profits of the U.S. small stocks of the Russell 2000 grew 10%, while the emerging markets declined 3%. Since then, U.S. profits have continued climbing.

Bernstein now forecasts that the U.S. will again outdo emerging markets in the coming year. In recent months, many U.S. companies have been matching or outdoing Wall Street's earnings estimates. In contrast, the emerging markets have been delivering earnings disappointments. In his mutual fund, Bernstein has 32% of assets in U.S. stocks and very little in the emerging markets. "We continue to believe that the U.S. stock market may be in the midst of one of the biggest bull markets of our careers," he says.

Stock quotes in this article: EARAX, WMCNX 

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