Global Macro Strategy

Global macro managers analyse factors such as economic growth, inflation, interest rates, central bank policy, government finances, trade and geopolitical events. Based on their views, they take long or short positions, often using futures, options and other derivatives, across a wide range of markets.

There are two main approaches. Discretionary global macro relies on the judgement of portfolio managers. Systematic global macro uses computer models and rules to identify trends and opportunities.

A famous example is George Soros’s bet against the British pound in 1992. His fund concluded that the UK could not keep the pound within the European Exchange Rate Mechanism and took a large short position. When the UK left the mechanism, the fund reportedly made around 1 billion dollars.

For example, a global macro fund expecting a central bank to cut interest rates sharply might buy that country’s government bonds and sell its currency.

Global macro strategies can perform well during periods of economic upheaval and changing policy, and often have low correlation with stock markets. However, they can suffer large losses when their views prove wrong.