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Global Macro and Managed Futures Performance Review

Steve LeCompte | | Posted in: Fundamental Valuation, Mutual/Hedge Funds, Technical Trading

Guide Trend Following and Momentum Trend following

Key Insight

Global macro and managed futures hedge fund indexes showed full-sample average annual net alphas of 4.0% and 3.2% versus 2.1% for long-short equity, relative to U.S. stock and bond factors, though alphas weakened 2008–2020 (Jan 1994–Dec 2022; HFR and Credit Suisse indexes).

Should qualified investors count on global macro (GM) and managed futures (MF, or alternatively CTA for commodity trading advisors) hedge funds to beat the market? In their November 2023 paper entitled "Global Macro and Managed Futures Hedge Fund Strategies: Portfolio Differentiators?", Rodney Sullivan and Matthew Wey assess the performances of GM and MF hedge fund categories, defined as:

  • GM - try to anticipate how political trends and global economic activity will affect valuations of global equities, bonds, currencies and commodities.
  • MF - rely systematic trading programs based on historical prices/market trends across stocks, bonds, currencies and commodities.

For comparison, they also look at the long-short equity (LSE) hedge fund category. They decompose category returns into components driven by exposures to U.S. stock and bond market return factors, other factor premiums and unexplained alpha. They focus on how fund categories have changed since the 2008 financial crisis, emphasizing performances during market downtowns. Using index returns from Hedge Fund Research (equal-weighted) and Credit Suisse (asset-weighted) during January 1994 through December 2022, they find that:

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