Institutional Investor Appetite for Global Macro Hedge Funds – October 2012

by Graeme Terry

  • 01 Oct 2012
  • HF

Ongoing financial uncertainty has presented opportunities for investors in global macro hedge funds as they look to take advantage of macro-economic conditions to achieve above average returns in a testing economic climate. Preqin currently tracks 1,346 institutional investors in hedge funds with an active interest in global macro strategies. Of these investors, 785 are based in North America, 403 are based in Europe and 158 are based in Asia and Rest of World. Global macro strategies tracked by Preqin include commodities, foreign exchange, fixed income, macro, and managed futures/CTA.

In terms of the strategies investors are targeting, pure macro hedge funds are the most popular, with 72% of global macro investors targeting these funds. Managed futures/CTA and commodities funds are also popular, with 51% and 38% of interested investors targeting these strategies respectively. Twenty percent of global macro investors show an interest in foreign exchange/currency strategies and niche investment approaches such as natural resources (6% of global macro investors show an interest), energy (5%) and environmental strategies (1%) are also included within the global macro category.

Funds of hedge funds are the investor group most likely to commit to global macro strategies, with 70% of funds of hedge funds on the Preqin database indicating an interest in global macro approaches. Asset managers (66% of these investors indicate an interest) and public pension funds are also currently active in this area, with 66% and 64% respectively of these investor groups demonstrating an interest. Family offices and private sector pension funds both have 51% of investors interested, while global macro hedge funds are slightly less popular with endowments (41% of these investors interested) and foundations (32% of these investors interested). Texas-based family office Legacy Trust Company is an example of an investor currently looking to increase exposure to global macro strategies.

A recent Preqin study of investors in hedge funds found that macro funds had been viewed as best performing over the last 12 months, with 30% of investors stating that these funds had exceeded their expectations over the previous year. The next best performing strategies were also in the global macro category, with 26% and 15% of investors feeling that fixed income and managed futures respectively had exceeded their expectations. Some investors did feel that these strategies had fallen short of expectations (18% for managed futures, 10% for macro and 6% for fixed income), although this was considerably less than the 55% of investors who stated long/short equity funds had fallen short of expectations.

Overall, institutional investors remain confident in the benefits of investing in global macro hedge funds. Macro funds can present attractive opportunities in the current financial climate, although managers will have to make sure that performance is satisfactory in order to keep growing the number of investors interested in these funds.

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