The decline of volatility across many stock and bond sectors has proven expensive for global macro hedge fund managers, with the HedgeFund.net index of 129 macro funds declining 1.21% this year, compared to last year’s 20.39% gain.

A macro fund is a hedge fund that has the most diverse holdings possible. It can be invested in equities, bonds, derivatives, currencies, and commodities. Traditionally, managers use either macroeconomic analysis to craft an investment thesis or intensive computer modeling to find deviations in historical price relationships between assets. More often, the managers use some combination of both.

Many of the consistently highest returning hedge funds are macro funds, including Paul Tudor Jones’s funds, George Soros’s Quantum Endowment fund, and Bruce Kovner’s Caxton fund (Mr. Kovner has an ownership interest in the New York Sun.)

“It’s been hard to make money in this sector this year because what volatility there has been has been unexpected and brief – no trend has emerged that can sustain real trading volume,” said Lyster Watson’s general partner Richard Watson. Lyster Watson is a $1.4 billion fund-of-funds, with investments in several global macro hedge funds. He declined to name the funds in which his firm has invested.

“This happens in all asset classes sometime, but you rarely see it in the two most important ones – American stocks and bonds-simultaneously. If you have positive returns this year, you’re probably at the top of the class,” Mr. Watson said.

A fund manager based in Summit, N.J., said, “The tight trading ranges this year have forced us to readjust our approach somewhat. We are lucky, since we do most of our trading based on options and futures, so hedging isn’t really a problem. If you want extra return this year, you are going to have to take extra risk out of all proportion to its probable return.”

This manager, who runs a $25 million fund, said his strategy now is to focus on oil and other energy sectors, as well as currencies.

“They are the only areas where you’ll see volatility, period,” he said. “Of the two, energy, specifically oil, is in a class by itself. It seems hard to lose by just buying and holding oil these days.”

The manager said currencies are the place to make trades based on economic views, since bonds, whose prices traditionally react to economic data, have had such a decline in volatility.