Global macro
Encyclopedia
Global Macro is defined as the strategy of investing, on a large scale, around the world using economic theory to justify the decision making process. The strategy is typically based on forecasts and analysis about interest rates trends, movements in the general flow of funds, political changes, government policies, inter-government relations, and other broad systemic factors.
Macro trader Yra Harris claims that "global macro" is really a new term, which used to be called "geopolitics
." George Soros
famously employed a global macro strategy when he sold pound sterling
in 1992 at the time of the European Rate Mechanism debacle.
In an Opalesque Roundtable discussion of Global Macro, hedge fund manager John Burbank discusses the increasing importance and shift of private and institutional investors toward more global macro strategies. Burbank defines global macro as "having a reason to be long or short something that is bigger than a fundamental stock view."
, discusses global macro trading in his video interview. Novogratz describes global macro strategies as monitoring these macroeconomic stories, such as global imbalances, business cycle
s, the survival of the Euro, and changing growth models of emerging economies. He says that there is an inherent difference between global macro fund managers and traditional equity managers. Most long/short equity managers started in research as analysts and look to follow these macroeconomic stories based on what positions they believe in and stock positions they rely on.
On the other hand, global macro traders and managers come primarily from the risk side of trading. For macro traders and managers, the primary element in decision-making is risk, because when investing in such a speculative world there are so many risk factors and moving data points that they must take into account. Macro traders are not fundamentalists; they rely on risk management and staying liquid to avoid a liquidity crisis
. In 2007 and 2008, with the credit bubble where there was a long period of low volatility
and illiquidity, many global macro funds found themselves with liquidity problems.
Macro trader Yra Harris claims that "global macro" is really a new term, which used to be called "geopolitics
Geopolitics
Geopolitics, from Greek Γη and Πολιτική in broad terms, is a theory that describes the relation between politics and territory whether on local or international scale....
." George Soros
George Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...
famously employed a global macro strategy when he sold pound sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
in 1992 at the time of the European Rate Mechanism debacle.
In an Opalesque Roundtable discussion of Global Macro, hedge fund manager John Burbank discusses the increasing importance and shift of private and institutional investors toward more global macro strategies. Burbank defines global macro as "having a reason to be long or short something that is bigger than a fundamental stock view."
Global Macro Trading
Global Macro is defined as the process of investing, on a large scale, around the world using economic theory to justify the decision making process. Global Macro trading strategies are based on educated guesses about the macroeconomic developments of the world. Mike Novogratz, president of hedge fund giant Fortress Investment GroupFortress Investment Group
Fortress Investment Group LLC is an investment management firm based in New York, New York. The company went public on February 9, 2007.-History:...
, discusses global macro trading in his video interview. Novogratz describes global macro strategies as monitoring these macroeconomic stories, such as global imbalances, business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...
s, the survival of the Euro, and changing growth models of emerging economies. He says that there is an inherent difference between global macro fund managers and traditional equity managers. Most long/short equity managers started in research as analysts and look to follow these macroeconomic stories based on what positions they believe in and stock positions they rely on.
On the other hand, global macro traders and managers come primarily from the risk side of trading. For macro traders and managers, the primary element in decision-making is risk, because when investing in such a speculative world there are so many risk factors and moving data points that they must take into account. Macro traders are not fundamentalists; they rely on risk management and staying liquid to avoid a liquidity crisis
Liquidity crisis
In financial economics, liquidity is a catch-all term that may refer to several different yet closely related concepts. Among other things, it may refer to Asset Market liquidity In financial economics, liquidity is a catch-all term that may refer to several different yet closely related...
. In 2007 and 2008, with the credit bubble where there was a long period of low volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
and illiquidity, many global macro funds found themselves with liquidity problems.