How To Make Sense Of a Global Macro Hedge Fund?

Tall buildings that represent global macro hedge fund.

A Global Macro Hedge Fund can best be identified through the use of funds in active management, in attempts to profit from broad market fluctuations resulting from Economic or political events.

Let’s break down the Global Macro Hedge Fund, as it consists of two meanings; Global Macro as a strategy, and Fund as a partnership.

Below, we get to see both of which build up its meaning.

Simply put, Global Macro is an investment strategy that seeks to make profits from the prediction and interpretation of large-scale economic and political events.

 A very memorable example of what is now recognized as a Global Macro strategy was, when George Soros shorted (sold) the British Pound in 1992, just couple months before, known now, as the “Black Wednesday.”

Newspaper stand, on "Black Wednesday."

While a Hedge Fund, on the other hand, is an investment partnership between a fund manager, often known as the general partner and the hedge fund investor, often identified as the limited partner; with the sole purpose of maximizing returns.

Global Macro Hedge Funds came to being as investors sought to make money regardless of rising or falling currencies, commodities, equities or futures markets.

The term “hedge fund” comes from risk hedging techniques that these entities were initiating on their existing positions, both, long and short.

Nowadays the types and nature of the hedging tactics enhanced, as did the various types of investment assets.

It is safe to say,  modern-day hedge funds participate in a diverse range of markets.

They employ a wide range of trading instruments, robust strategies, and sophisticated risk management techniques.

Note:

Hedge funds are commonly distinct from mutual funds, due to the fact that their leverage is not capped by the regulators. Furthermore, modern hedge funds are unique from private equity funds, given that, the greater number of these funds allocate their capital in comparatively liquid assets.

 

Here is a small list of most successful Fund Managers:

 

Global Macro Hedge Fund founder Ray Dalio of Bridgewater Associates.

Ray Dalio – (Bridgewater Associates)

 

Global Macro Hedge Fund founder George Soros of Quantum Group of Funds.

                                        George Soros – (Quantum Group of Funds)

 

Global Macro Hedge Fund founder John Paulson of Paulson & Co.

John Paulson – (Paulson & Co.)

 

Global Macro Hedge Fund founder Paul Tudor Jones II of Tudor Investment Corporation.

                                 Paul Tudor Jones II – (Tudor Investment Corporation)   

 

Global Macro Hedge Fund founder Bill Ackman of Pershing Square Capital Management.

Bill Ackman – (Pershing Square Capital Management)

 

Global Macro Hedge Fund founder Paul Singer of Elliott Management Corporation.

                                      Paul Singer – (Elliott Management Corporation)

 

Here is the link to TipRanks.com to track Top 25 Hedge Fund Managers

Note: The list has been compiled in no particular order, however the Bridgewater Associates, is considered to be the world’s largest hedge fund firm with more than $150 billion assets under management.

 

 Types of Global Macro Strategies

 Image of a huddle in relation to a global macro hedge fund strategy. A Global Macro Strategy is a set of approaches that bases its holdings, whether short or long positions in; equity, fixed income, futures and currency markets. The decisions to buy or sell the assets are based on political and economic views of various countries. There are three types of Global Macro Strategies.

Coming first we have the Discretionary Macro strategy; it deploys directional positions of an asset, to express a positive or negative view on a market.

Secondly, we have a Commodity Trading Advisor (CTA) or Managed Future macro strategy; Similar to the Discretionary approach, but with different methodology. CTA’s make use of price-based and trend-following algorithms in trading.

Lastly, we have the Systematic Macro strategy; it’s a hybrid approach that makes use of both discretionary and CTA macro strategies in trading. The systematic global macro uses fundamental analysis analogous to that of discretionary macro, but with a systematic algorithm based approach of the CTA traders.

Be sure to also read:

Simple Logistics To Be Aware: Forex Fundamental Analysis

Macro Trading FOREX

Global Macro Hedge Fund; the Pros and Cons

 Boy in a glasses is learning all about the global macro hedge fund strategies.

Global Macro Hedge Funds offer varying incentives, for one we have; the investors’ exposure to an aggressive investment strategy. The complexity of the tools used is all at the disposal of the investors. These strategies are deployed in nurturance of aggressive investment strategies, all with one goal; being able to yield more returns despite market fluctuations in any given period.

Secondly, Global Macro Hedge funds feature more stable gains. Through the various Global Macro Strategies, each one of them is designed and tailored for ensuring returns through expert analysis and forecasting of market changes globally. Predictions of which quite generally create attractive investment opportunities, thus huge returns.

Thirdly, hedge funds cannot be advertised to the general public and, as such, are made available to certain sophisticated or accredited individuals. Meaning, you have to meet certain entry level requirements just to get your foot in with some of these Institutions.

 As a matter of fact, in one of his interviews, Ray Dalio mentions that back in days you wouldn’t be able to do business with his Fund if you had less than 500 million dollars as an investment capital.

They also operate with greater flexibility than mutual funds and other investment funds. Most of them prefer to operate without direct regulatory oversight by bypassing licensing requirements applicable to investment companies.

As mentioned, a Global Macro Hedge Fund features extensive market knowledge, impeccable risk management techniques, and expertise in a particular asset class. That is, probably why, hedge fund managers are handsomely rewarded for their knowledge in financial investments.

However, much as the advantages sound alluring, there are also as many disadvantages of which they have. The first, being that Global Macro Hedge Funds face critics heavily for their significant investment fees. Investors are charged a performance fee to motivate the managers, as well as a management fee.

Secondly, we get to see that with enormous leverage, that is, the amount invested, also come massive losses. This also explains why some hedge funds end up in a bankruptcy.

A global macro hedge fund manager is walking towards his investment clients.

 

Conclusion

Global Macro Hedge Funds can prove to be a complicated investment to pursue, as they are difficult to comprehend. This is partly due to the complex strategies employed, as well as, bad publicity by the media.

The truth is, hedge funds at times meet all expectations from attractive returns and performance, and besides the down times some have pretty stable returns. With the right education, familiarization, and evaluation, there is a global macro hedge fund that fits the demands of every investor.

However, with all that said, as is with everything else in life, caution is advised. As much, as the advantages are attractive, the risk poses much of a threat, and thus investing in a Global Macro Hedge Fund should not be taken lightly.

 

What do You Think Of  Hedge Funds?

Are they worth their salt…

Are Their Performance & Management Fees justifiable…

Please leave your comment below, and let us know.

 

Simple Logistics To Be Aware: Forex Fundamental Analysis

Freight containers, representing Logistics in Forex Fundamental Analysis.

Forex Fundamental Analysis is a term that is actually very significant to know and understand if you deal with currency speculations.

When applied to Forex, it focuses on the overall state of the Economy (the top-down approach) and considers factors including; Employment, Manufacturing & Production, Earnings, Interest rates, Housing, GDP, and etc.

One must recognize the motives of why and how a particular event, for example, an increase in the Unemployment rate, influences a country’s market, which in the end shapes the level of stipulation for its currency.

The suggestion behind this type of examination is that, if a country’s present or future financial outlook is in good standing, their currency should remain strong or become stronger.

In simple terms, the better an Economy stands economically, the more spending is initiated by corporations and investors. This, in turn, fuels an expansionary economic cycle.

 

Weighing Economic Indicators

Understanding some components regarding fundamental analysis and indicators is important to Fx traders, because it helps them to know where properly invest their capital. Being a forex speculator means that you have to understand what information is key and what information is just rumors or false data. Certain factors affect an economy more strongly than the others.

Newspaper and glasses

There is a whole plethora of fundamental economic announcements that is coming up every week. However, not all indicators are created equal.

For instance, if you were a global macro trader, then the New Zealand unemployment wouldn’t be as important to you as the U.S. unemployment. While the New Zealand unemployment is certainly important for Dairy speculators in Futures markets, as the country is the biggest producer of Dairy products, nevertheless, the U.S. economy has a much larger impact on the Global Economy as a whole.

The three major factors that influence an economy are Interest rates (which are probably the most important), Employment, Foreign capital and Trade flows. It’s important to note that Inflation has a direct impact on Interest rates.

Here is the list of top Economic indicators for Global Fx Investors, when analyzing any Economy:

Be sure to also read: 

Pretty Much Everything You Need To Know About the FX Pips

The Effects of a Country’s Currency Value

One of the ways in which a country’s currency value gets influenced is through exporting goods and services. The more the country exports, whether it is goods, or services, the greater is its competitive edge.

For example, if an economy is strong in a particular sector, as Japan in Manufacturing, or Great Britain in Financial services, then these countries are more likely to export the excess abroad. Exports create jobs, bring in higher income, and increase the overall standard of living.

Exports, also, help to increase the Foreign Reserves in the nation’s Central Bank.

Here is the list of key factors that affect Exchange Rates:

Six Fundamental factors affecting Exchange rates.

 

Photo credit: CompareRemit.com

Also, check their great article and detailed overview of the factors here >>>

While the impact of a currency’s change on an economy is comprehensive, many fail to notice the exchange rates because most of their dealings and communication are carried out in their main currency. For most people, exchange rate differences become noticeable for circumstances such as Travel.

When performing a forex fundamental analysis, it is advisable to check the currency exchange rate; as the currency, often than not, reflects its economical and political situation. In a nutshell, here is an easy way to look at it; the higher the currency value, the better is the economy. The lower the currency value, the more it is considered to be in a bad shape.

 

In Conclusion

Forex Fundamental Analysis is a prime approach to investigate the probable shifts of a currency in the course of the strong, or weak point of a particular country’s financial standing and outlook. Evidently, this is why it peaks the eye of Global Investors; as they will invest in a country’s currency if it is performing well. And in order for a country to do well, certain factors influence it in either a positive or negative way.

Have You Tried To Implement Fundamental Analysis In Your Trading?

When Evaluating A Currency… What Economic Indicators, If Any, Are You Focusing On?

Please leave a comment and let us know…

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