Global Macro

Global Macro - THESEUS - Was the mythical founder-king of Athens and was the son of Aethra by two fathers: Aegeus and Poseidon. Theseus was a founder-hero, like Perseus, Cadmus, or Heracles, all of whom battled and overcame foes that were identified with an archaic religious and social order. As Heracles was the Dorian hero, Theseus was a founding hero, considered by Athenians as their own great reformer
Global Macro

Global macro—one of the oldest hedge fund strategies—is trading based on economical/political/sociological factors, so-called “fundamental factors” that move market prices of currencies, bonds, equities, and commodities.

Normally global macro traders/investors, which are trying to uncover imbalances within or between the major asset classes, wait for a catalyst that will unravel the assumed dislocations and make leveraged bets on the “anticipated” price movement, that can be referred to as far-from-equilibrium conditions.

The macro part of the name derives from the hedge fund managers’ attempts to use macroeconomic principles to identify dislocations in asset prices while the global part suggests that such imbalances are sought anywhere in the world.

However, in recent years more and more global macro managers use a combination of a broad top-down macro analysis with a bottom-up micro analysis of individual companies in specific sectors from attractive countries.

Global macro trades can be classified as either directional, where an investor bets on discrete price movements such as buying commodities or selling short U.S. bonds, or relative value, where two similar assets are paired in a long/short trade to exploit a perceived relative mispricing such as selling long-term bonds against bonds with shorter maturities.

Normally, relative value trades have a significant lower volatility than directional trades. Approaches in finding profitable trades can be classified as either discretionary or systematic.

Discretionary trading is based on a manager’s subjective opinion or market conditions while systematic trading is based on signals of a quantitative model. Burnstein (1999) and Drobny (2006) provide a detailed description of different global macro investing concepts and strategies.