Michael Aronstein, a poet, and Michael Shaoul, a doctor of philosophy, have made their MainStay Marketfield Fund the world’s fastest-growing by anticipating recoveries in the most-hated assets.
Marketfield grew more than five-fold to $9.5 billion in the past year, the biggest increase of a fund with more than $5 billion in assets, after betting on a rebound in U.S. housing stocks and European shares. Now, their success relies on Irish and Italian stocks rallying and equities in China, Brazil and India tumbling. The New York-based fund has advanced 70 percent since July 2007, more than triple the return of the Standard & Poor’s 500 Index, data compiled by Bloomberg show.
“I don’t know where the level is,” Aronstein, a former Merrill Lynch strategist who writes poetry in his spare time, said of the potential for further declines in developing nations’ stocks in an interview April 4. “But if we are right, it’s going to get to the point where people cannot stand it anymore.”
Aronstein, 60, a Yale University English major, and Shaoul, 47, a British Ph.D in philosophy, follow economic indicators including credit cycles to guide investment decisions, anticipating the accumulation and consequent reduction of debt lead to boom or bust. By combing through data from the Federal Reserve’s balance sheet to Brazil’s consumer loans to China’s auto sales, they find turning points in economic behavior and invest for the reversal of the trend.
The MSCI Emerging Markets Index dropped 0.8 percent yesterday to the lowest level since November, extending its retreat from a Jan. 3 high to 10 percent.
Marketfield, which started with $500,000 and was named after a street used as a Manhattan livestock market in the 17th century, seeks profits from both gains and losses in assets including stocks, bonds and commodities.
The average rise of 10 percent over the past five years beat 96 percent of its peers. The gains and new investment helped Marketfield’s assets grow 468 percent from about $1.7 billion at the end of May 2012.
When Marketfield started buying U.S. homebuilder shares in late 2009, foreclosures tracked by RealtyTrac.com had more than tripled from the end of 2006. The SPDR S&P Homebuilders ETF lost 67 percent of its value that year from its 2006 peak, before rallying 15 percent in 2010.