By Laurence Fletcher

Hedge funds around the world are already cashing in on Donald Trump's surprise U.S. presidential election victory.

Traders last week broadly welcomed Mr. Trump's victory, believing it would bolster infrastructure spending and growth. But many are now chalking up large profits, thanks to the sharp moves in bond yields and currencies in the wake of the election result.

Funds that have fared well include some of the biggest names in the European hedge fund space including Brevan Howard and Rubicon Fund Management LLP.

Some say the election marks a fundamental change in the investment landscape for the $3 trillion hedge-fund industry. Manyfunds have struggled for years as central bank bond-buying programs have damped the volatility and price differentials they like to trade.

Brevan, one of the world's biggest hedge funds, has seen its flagship $13.7 billion Master fund gain 2% this month to Nov. 11, according to performance numbers sent to investors and reviewed by The Wall Street Journal. That is its best profit in a calendar month for a year and equates to a profit of around $275 million this month. A spokesman for Brevan declined to comment.

"This month is one of the best months I can remember for macro" hedge funds, said Michele Gesualdi, chief investment officer at Kairos Investment Management, which invests in hedge funds and which runs $10 billion in assets.

"Trump is turbocharging what was already happening," he added. "There's increased volatility in fixed income, currencies are moving, big macro themes are working." He said his portfolio had just recorded its best week of profit, helped by aggressive trading of futures and exchange-traded funds on the Russell 2000, Nikkei and U.S. banks during election night.

The sharp postelection market moves have worked out particularly well for macro hedge funds, which bet on bonds, currencies and stocks. These funds, which have lost money in three out of the previous four calendar years, according to data group HFR, have long been positioned for U.S. interest rates to rise and the dollar to strengthen. They are finally benefiting from a sharp rise in the U.S. 10-year Treasury yield from 1.86% before the election result to 2.30% on Thursday, and a 3% rise in the dollar versus the euro.

Many such funds have been running relatively small positions in recent months but tend to increase their bets quickly as markets move in their favor, say industry insiders. Macro funds now "definitely have crowded" bets on instruments such as the dollar, said one investor in such funds.

Brevan's latest letter to investors shows the fund was positioned to benefit from a rise in the U.S. dollar and from falling European currencies. The fund also benefited from spikes in bond yields, said a person familiar with the matter.

The gain means the fund, which has already recorded two consecutive calendar years of losses in 2014 and 2015 and which has seen billions of dollars of redemptions from investors, is now down just 0.7%, having been down 3.4% at the end of September.

Another macro hedge fund, London-based Rubicon, was down almost 18% this year through early November, according to performance data reviewed by the Journal. But it has surged by around 10% last week, said two people who had seen the numbers. The fund made money from bets on rising bond yields, said one of the people. A spokesman for Rubicon declined to comment.

Singapore-based Dymon Asia Capital, which was set up by former Goldman Sachs trader Danny Yong and Standard Chartered banker Keith Tan and which runs $4.8 billion in assets, made large gains last week and is up roughly 5% this month, said a person familiar with the fund's performance. Dymon didn't respond to requests for comment.

Caxton Associates LP, which had already made strong gains in October thanks to large bets on rising bond yields, has recovered from a 1.2% loss in the first week of the month and is now up 0.4% in November, said an investor.

The industry has been struggling for years to make money. Many hedge-fund managers believe their favorite trades -- such as betting on price differences between stocks or bonds -- have been derailed in recent years by huge central bank bond-buying programs, which have pushed many assets in the same direction.

Not all funds are prospering, however.

London-based Horseman Capital, which runs $2.3 billion in assets, has seen its main Global fund, managed by Russell Clark, lose around 9% in November, said a person who had seen the numbers. Performance had been hurt by bets on rising bond prices and falling stock prices. The fund is down around 14% this year.

Horseman didn't respond to a request for comment.

Write to Laurence Fletcher at laurence.fletcher@wsj.com

(END) Dow Jones Newswires

November 18, 2016 16:35 ET (21:35 GMT)

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