CAIA Level II: Advanced Core Topics in Alternative Investments, 2nd Edition

CHAPTER 35

Global Macro and Currency Strategies

Global macro managers have been around for more than 30 years, but their golden era culminated in the early 1990s, when their strategy represented more than half of worldwide hedge fund assets. This was the time when legendary managers such as George Soros (Quantum Fund) and Julian Robertson (Tiger Fund) were running multibillion-dollar funds involved, primarily, in leveraged directional trades. Today, this strategy represents between 10% and 15%, or over $400 billion, of the hedge fund industry's assets under management. While macro assets have grown over time, they have grown at a slower rate than other hedge fund strategies. Investors' appetite for global macro funds fell in mid-2000, when high-profile operators such as George Soros and Julian Robertson shut down their macro funds and retired after posting disappointing performance numbers.1 Other fund managers returned capital to investors because they were losing their edge in large liquid markets, yet were too big to operate in illiquid markets. More importantly, by 2005, the lack of volatility across global markets had made it difficult for global macro funds to make money. Lastly, the number of liquid bond and currency markets (and hence opportunities) was drastically reduced with the introduction of the euro.

After a long dry spell, the global macro strategy came back in favor in the second half of 2007 and in 2008, when global market volatility soared and the fear of a ...