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Fund Spy

Giving Global Macro Funds a Second Glance

The world is these alternatives managers' oyster.

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Morningstar's rapidly expanding multialternative category can be informally divided into three groupings: multistrategy funds (the largest cadre, either subadvised by external managers or run internally), hedge fund replicators (who try to capture so-called hedge fund betas through quantitative means), and global macro strategies. Global macro managers have wide latitude to invest long and short across world regions and asset classes. As the name global macro suggests, these managers typically make allocation decisions based on broad macroeconomic views, and they seek out both directional and relative value opportunities. Global macro funds commonly use highly liquid instruments, such as equity or currency futures. In many hedge fund taxonomies, managed-futures strategies are considered a systematic, nondiscretionary subset of global macro.

It's possible to find funds that use roughly similar approaches in long-only categories like world allocation or tactical allocation:  BlackRock Global Allocation (MDLOX) (run by Dennis Stattman) and  PIMCO All Asset All Authority (PAUIX) (run by Rob Arnott) are two well-known examples. What distinguishes global-macro funds in the multialternative Morningstar Category is their consistent adoption of short positions, often expressed through relative-value pairs trades, but which can also take the form of hedging or even (less commonly) outright shorting. Global macro managers also frequently establish absolute return mandates, as opposed to investment goals relative to a benchmark.

Josh Charlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.