Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets, Revised and Updated

Chapter 2

The History of Global Macro Hedge Funds

The path to today’s style of global macro investing was paved by John Maynard Keynes a century ago. For an economist, Keynes was a renaissance man. Not only was he the father of modern macroeconomic theory but he also advised world governments, was involved in the Bloomsbury intellectual circle, and helped design the architecture of today’s global macroeconomic infrastructure by way of the World Bank and International Monetary Fund. At the same time, he was also a successful investor, using his own macroeconomic principles as an edge to extract profit from the markets. Some say he was the first of the modern global macro money managers.

In the words of Keynes’ biographer Robert Skidelsky, “[Keynes] was an economist; he was an investor; he was a patron of the arts and a lover of ballet. He was a speculator. He was also confidant of prime ministers. He had a civil service career. So he lived a very full life in all those ways.”

Keynes speculated with his personal account, invested on behalf of various investment and insurance trusts and even ran a college endowment, each of which had different goals, time horizons, and product mandates. Upon his death, he left a substantial personal fortune primarily a result of his financial market activities.

Evidence of Keynes’ investing acumen can be found in the returns of the King’s College Cambridge endowment, the College Chest, for which he had total discretion as the First Bursar. A publicly ...