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1.
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Definition
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Global macro funds invest in those
markets and instruments which they believe provide the best
opportunity. At any given time, global macro managers may take
positions in currencies, debt, equities or commodities. Global
macro managers may elect to take outright directional positions;
and, depending on their own expertise and the risk-return profile of
the markets in which they are trading, they may also elect to take
relative value positions, where a long position or set of positions
is dynamically paired off against a short position or set of
positions.
Other Resources:
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Capital Market Risk Advisors:
A hedge fund strategy that involves establishing market
positions to take advantage of perceived broad economic trends
and changes anticipated by the hedge fund manager.
More…
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Advisor.ca:
Using top-down economic analysis, this strategy may make
directional bets on currencies, stocks and interest rates. It
may also play the spreads between securities of different
countries. Macro funds are often leveraged and highly volatile.
More…
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2.
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Examples, Types, or
Variations
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Global Macro portfolios can include:
a. Stocks
b. Bonds
c. Currencies
d. Commodities in the form of cash
e. Commodities in the form of derivatives
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3.
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Formula
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The
general goal for Global Macro funds is: |
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High
Returns + Liberal Risk |
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4.
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Related Terms
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5.
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As
Used in the Hedge Fund World
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Other Resources:
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Macroanalytics:
Global Macro Hedge Funds are typified by the global nature of
their strategies which can involve trading across a variety of
markets to profit from overarching trends, market biases, or
future expectations regarding specific countries or regions.
Typically a true macro fund focuses on the outlook for a
country, region, or class of countries rather then picking
stocks or investing solely within one market.
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6.
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Applications
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There
are many ways that various global macro investors measure an
investment's worth (one of the most infamous being George Soros'
Currency Theory Technique), but most tend to have a couple things in
common:
1. They recognize and capitalize on the domino effect that specific
countries or areas may have across global markets.
2. They are willing to invest across a broad range of trading
instruments and sectors, moving frequently from trend to trend.
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7.
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Misused
& Abused
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In spite
of Global Macro greats such as George Soros and Julian Robertson,
many people believe that Global Macro investing is extremely
volatile compared to other hedge fund strategies. This is mainly due
to the use of heavy leverage on directional bets, which can equate
to very significant losses.
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8.
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Additional Sources of Information
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Books
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News
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Scholarly Papers
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Back to Terms
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