In the December 2011 issue of the Hedge Fund Journal, Mark van der Zwan, portfolio manager, and Radha Thillainatesan, investment analyst, of the Morgan Stanley Alternative Investment Partners Fund of Hedge Funds wrote a research paper on the Global Macro strategy. During times of stress (current credit crisis, technology bubble and Russian default of 1998), it has one of the top two returns for hedge fund strategies. Global macros returned 4.7% and 15.5% (as defined by the HFRI Macro Index) for the credit crisis and technology bubble while the Standard & Poor's 500 returned -51% and -44.7% respectively. No numbers were given for the Russian default. Correlation of returns also drop during these times. In the credit crisis, the statistic is -17%.
Obviously, investors should use global macro funds to diversify their assets from the standard equity and fixed income funds. In the current volatile markets, investors should think about the high volatility of returns for the strategy, the wide variety of macro strategies and the subsequent wide variety of returns. As macro strategies lose their investing edge, managers are specializing in their investment strategies either through asset class (commodities, currencies, etc.), technical trading signals or length of holding (as measured within the same trading day). This causes the wide range of strategies and returns. With proper research, the global macro portfolio can be diversified and perform well during market crises.
The article can be accessed here.
I would like to thank the Chartered Alternative Investment Association (CAIA) for providing a free subscription to the Hedge Fund Journal.
No comments:
Post a Comment