![]() However, the strategy is also associated with rare, very negative returns, particularly during times of high market volatility or financial crises. A carry trade is characterized by stable, slightly positive returns over time, as the interest rate differential between the two currencies (or carry in general) generates a consistent profit. For example, in a bond carry trade, the carry is the difference between the yield and the financing rate or for an equity carry trade it is the difference in dividend yields between two indices. ![]() Indeed, a carry trade strategy can be extended to any asset class. One of the oldest and most popular strategies in global macro is the carry trade: borrowing in a low-yield currency and investing in a higher-yield currency, with the expectation of profiting from the interest rate differential. In contrast, relative value strategies seek to identify mispricings in the market, investing in assets that are undervalued relative to their peers or the broader market. This approach assumes that markets tend to underreact to news, and it aims to profit by going long assets whose macroeconomic trends are improving and short those with declining macroeconomic trends. Trend-following strategies seek to profit from momentum in the market, identifying trends and investing in assets that are showing positive price momentum. In contrast, technical strategies rely on analysing market data, such as price and volume, to identify short-term trends and opportunities. They often take a longer-term approach, looking for opportunities that may take several years to play out. This trend has steadily continued over the last 3 years with 73% of asset managers surveyed by Coalition Greenwich reporting an increase in their usage of alternative data over the last few years, with 64% of them reporting an increase in their alphas.įundamental strategies focus on analysing macroeconomic data, such as GDP growth, inflation, monetary and fiscal policies, to identify trends and opportunities in the market. For example, during the pandemic managers were heavily relying on Apple and Google’s mobility statistics to track economic reopening. Spending on alternative data has been increasing steadily from just over $200m in 2016 to over $1.5bn in 2020, according to Bloomberg. Systematic strategies have now grown to include quant macro strategies using alternative data in their models. On the other hand, systematic strategies rely on quantitative models and algorithms which provide trading signals based on macroeconomic data to exploit market inefficiencies. These managers often take a flexible and opportunistic approach to investing, adjusting their positions based on changing market conditions. The first step towards defining global macro strategies is dividing them across three foundational dimensions: discretionary versus systematic, fundamental versus technical and trend-following versus relative value.ĭiscretionary strategies rely on the intuition and expertise of individual managers to identify and act on macroeconomic trends. This peculiarity makes defining global macro strategies a challenging task, as there is no single agreed-upon definition or set of criteria. Unlike most of the widely adopted hedge fund strategies, global macro strategies are market and asset class agnostic, allowing investors to seek out opportunities in any part of the world through any instrument at their disposal. In this article, we will explore the evolution of global macro strategies, examine the reasons behind the disappointing performance in 2023 thus far, and consider whether or not these strategies are likely to rebound in the foreseeable future.ĭefinition and evolution of global macro strategies However, after an outstanding performance in 2022, global macro strategies have struggled to repeat their success in 2023, thus leading some to question whether the strategy has run its course, or whether it is simply experiencing a temporary setback. In recent times, these strategies have gained in popularity as investors seek to diversify their portfolios and take advantage of the growing interconnectedness of global markets. ![]() Global macro strategies, which aim to profit from economic and political trends across markets and asset classes, have been a staple of the investment world for decades.
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