systemic (“quant”), number of positions and average holding period, long/short bias, and gross and net exposure. Within the space, global macro hedge funds are split up by the same criteria as always: single-manager vs.
a 60/40 portfolio from 1990 to early 2022:Īlthough the global macro hedge fund index outperformed 60/40 in this ~30-year period, the main benefit is not so much “outperformance” as it is diversification.Įither approach will produce drawdowns, but they’ll occur at different times and with different magnitudes. “integrated macro” strategy (i.e., systemic and discretionary) from 1993 to 2018 shows the benefits:Īnd here’s one based on an actual hedge fund macro index vs. This chart from AQR on a 60/40 portfolio vs. High Leverage – The average macro or managed futures fund uses a multiple of the leverage that an event-driven, equity, or credit fund uses (source: page 42 of this paper):įor the Limited Partners, a big selling point of global macro is that it has historically had a low correlation with a traditional equities and fixed income portfolio.Liquidity – Most global macro hedge funds invest in markets with tons of liquidity, as they must be able to change their positions on short notice.No Geographic Restrictions – As the name implies.Broad Sectors and Securities – You need to know at least a little about many different asset classes and derivatives for hedging and risk management.What Makes Global Macro Hedge Funds Different? Use equity or fixed income index futures in these two countries to bet on the one that will be most affected by the interest-rate hikes.Īs a PM, you decide which idea is best in terms of risk, potential returns, and overall fit with your portfolio, and then ask your traders and analysts to implement it.Buy interest rate swaps based on the relative increases in interest rates you expect in the U.K.Long gold or gold futures and hedge by longing the USD/AUD or the USD against the currency of some other gold-heavy country (as there’s often an inverse relationship between the USD and gold).You could buy FX put options at 0.53 to limit your losses.īut there are many other ways to trade this scenario: The simplest trade here would be to long the AUD/GBP, currently at 0.56, with the expectation that it could move above 0.60 over the next 12 months. You’ve also reviewed the central bank policies of Australia and the U.K., and you believe that rate hikes in Australia are not properly priced into the current AUD/GPB exchange rate.Īlso, since Australia is the second-largest gold producer globally and one of the top exporters, higher gold prices should boost the AUD because they’ll create a bigger trade surplus. You believe that worldwide inflation will accelerate due to massive fiscal stimulus and money printing by central banks, which should, in theory, boost gold prices. The simplest example of a global macro trade idea is a bet on currencies.Ĭurrencies are affected by many factors, including interest rates set by central banks, trade policy, economic growth, inflation, and geopolitical events. Global Macro Definition: Global macro is an investment strategy in which hedge funds aim to profit from broad market moves rather than from specific stocks or bonds they invest in currencies, commodities, futures, forwards, swaps, and more, and they analyze fiscal, monetary, trade, and geopolitical trends to make decisions.
#De shaw macro trading professional
On the other hand, global macro might be the best strategy if you have a professional sales & trading background or you’ve been an economist, strategist, or policy researcher: What is Global Macro? In practice, very few hedge fund Portfolio Managers consistently achieve good results with this strategy over long periods.Īnd if you add in all the armchair “macro specialists” on online forums, the percentage of traders who perform well plummets. Some global macro trade ideas are so simple that the average person who knows nothing about finance could understand them.īut the execution is extremely difficult, which explains why some of the largest trading losses in history have come from macro-oriented ideas (“short nickel,” European index futures, oil and gas futures, etc.). Global macro might be the most paradoxical hedge fund strategy.
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