Evening Brief – 08.07.23
After a period of relative dormancy following the global financial crisis, global macro funds achieved their greatest performance since 2008 last year, thanks to strong bets on rising interest rates. This is hardly surprising given that macro funds are meant to prosper during seismic changes in the macro regime.
When global markets are buffeted by economic and geopolitical headwinds, as they are now, investing becomes more difficult for most individuals. Global macro funds, for example, use a number of trading strategies across equities, fixed income, commodity and currency markets to invest in monetary policy, interest rates, inflation and geopolitical events.
Given the heightened volatility in the financial markets over the past several years, a study of professional investors conducted by UK-based Fulcrum Asset Management revealed that nearly two out of three believe that macro investing has become more important.
According to findings, 77% of those who believed in the rising relevance of macro investing did so because 2022 demonstrated the risks inherent in a portfolio concentrated in equities and bonds.
The asset manager surveyed 205 professional investors on a range of topics. About 100 of the respondents were UK-based and 105 were in the US.
The post pandemic period has seen large swings in markets across the board as interest rate expectations have fluctuated with inflation data, emphasizing the limited effectiveness of stock picking during large macro-triggered movements.
Global macroeconomic factors were regarded as “important” by 81% when establishing or changing their portfolio, and 72% indicated they were either investing more (58%) or thinking about allocating more (14%) to diversified strategies, such as global macro, over the next 12 months.
Just over half of the respondents attributed global macro investment strategies to their opportunistic nature, specifically their ability to capitalize on macro events quickly. Diversification at 51% was another widely cited benefit, due to its low correlation to equities and bonds.
Almost half (45%) indicated the strategy is a way to counteract financial and political shocks. Around 1% saw no value in the strategy and claimed it could lead to “knee-jerk” conclusions.
Just over four in ten (44%) said macro investing strategies have become mainstream, while almost one-third said it is not always evident what is in them, and 28% said they are “still a bit of an enigma.”
“The results of our survey demonstrate that the economic twists and turns of the past few years have well and truly left their mark as they have repeatedly upended expectations,” said Joe Davidson, managing partner at Fulcrum Asset Management.
Fulcrum has a global client base with $5.8 billion of funds under management across global macro, risk premia, thematic equities, alternative solutions and climate-aligned Investing.