Global Macro Hedge Fund
What Is a Global Macro Hedge Fund?
Global macro hedge funds are actively managed funds that endeavor to profit from broad market swings brought about by political or economic events. Global macro hedge funds are market wagers around economic events. Investors utilize financial instruments to make short or long positions in view of the outcomes they foresee because of their research. A market bet on an event can cover a wide assortment of assets and instruments including options, futures, currencies, index funds, bonds, and commodities. The goal is to track down the right mix of assets to expand returns assuming the anticipated outcome happens.
Understanding Global Macro Hedge Funds
Global macro hedge funds might position themselves around a specific outcome, or they can essentially set up positions to profit from global market volatility when they don't genuinely believe in a prediction yet realize that a binary outcome is unavoidable. Portfolio managers who utilize global macro strategies commonly center around currency, interest rate, and stock index strategies.
Global Macro Hedge Fund Example
Instances of global hedge fund activity were clear before the Brexit vote in 2016 when the United Kingdom voted to exit the European Union (EU). Global macro hedge funds that felt certain that Britain would vote to leave the EU took long positions in safe assets, like gold, and picked short positions against European stocks and the British pound. Global macro hedge funds that were unsure about the outcome took long positions in safe sanctuaries and different instruments that payout during market volatility. Some without a doubt speculated wrong and took losses on the long position in European stock indexes as the British pound and different assets plunged following the outcomes were known.
Since the funds are commonly actively-managed, they will generally require a greater initial investment and greater lifetime fees than passively-managed funds.
Special Considerations
Global macro hedge funds offer investors exposure to these high-level wagers that span assets and instruments. They offer a form of diversification that is not quite the same as most values making them appealing to investors who look for security from global financial events that can drag down stock and bond returns overall. Normally, it has been challenging for an individual investor to reproduce this type of strategy due to the capital required and the complexity associated with dealing with every one of the positions across asset classes and platforms. On the downside, global macro hedge funds have high investment limits and, surprisingly, higher fees. Exchange-traded funds (ETFs) have additionally made it feasible for investors to make likewise broad market wagers without paying similar level of fees.
Highlights
- The holdings in the funds are in many cases positioned around a specific consequence of international economic or political issues, yet the holdings can likewise be set up so the fund profits from general market volatility.
- Global macro strategies are either connected with currency, interest rates, or stock or equity indexes.
- Global macro hedge funds pursue investment decisions in view of the broad economic and political outlook for different countries.
- Holdings may be long or short positions in various equity, fixed income, currency, commodity, or futures markets.
- Global macro hedge funds incorporate the discretionary, commodity trading advisor, and systemic categories.
