Handbook of Hedge Funds

15

Global Macro

Investors should keep their eye upon the doughnut and upon the hole.

Global macro investing finds its roots in the early 1980s, as a result of the style drift of a few opportunistic hedge fund managers coming primarily from long/short equity and managed futures. The long/short equity people were typically bottom-up managers who had been very successful in taking long and short positions in under-researched small cap stocks. As the size of their portfolios increased, they needed to move to more liquid markets where larger bets could be placed. This was the case of George Soros (Quantum Fund) and Julian Robertson (Tiger Fund). The managed futures people, on the other hand, came from the derivatives and managed futures industry, which was already global and macroeconomic in nature. This was the case of Louis Moore Bacon (Moore Global) and Paul Tudor Jones (Tudor Investments). Despite their different origins, both groups of managers converged towards the same investment approach, i.e. investing globally and dynamically allocating capital and attention to the asset class, sector or region where the best opportunities lay.

Global macro funds have long been the most successful and largest category of hedge funds. Their reputation was essentially due to the phenomenal success of a few star managers, such as George Soros, Julian Robertson, Lewis Bacon and Bruce Kovner. Despite their popularity (or unpopularity!), it is important to realize that today they represent only ...