Global macro trading has been the most consistent hedge fund strategy for several years. In fact in according to Credit Suisse global macro has been the top performing trading style with a cumulative return of 483% from 1994-2008.
Why is this? How has macro done so well? Basically as opposed to long short equity or volatility arbitrage or any other strategy the mandate of global macro funds is to trade anything they can find anywhere that they find it. This flexibility enables them to find the best risk to reward situations possible and sidestep disasters and in fact make money off most of them.
Take 1987 for instance, Paul Tudor Jones made over 60% during the greatest one day crash in history. In 1998 several funds made a killing as Long Term Capital Management blew up losing billions. In the 2000-2002 crash many funds went long bonds, short stocks, and short the US Dollar. This enabled them to once again generate steady returns. And how about the financial crisis of 2008? Well macro as a group along with dedicated short sellers were the only strategies with positive returns.
Global macro investors were able to go short stocks, go long and then short commodities, and do anything else that amde sense within their risk management framework. By having this flexibility and looking at the big picture, global macro traders are better able to navigate the markets and generate good consistent returns.
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