![]() ![]() Often, prices adjust abruptly causing severe market dislocation. Macro events often occur as fundamental changes in global economies, typically brought about by shifts in government economic policies, political climates or interest rates which impact all financial markets. The Volatility Index reached such low levels, it was indisputable that risk was poised to make a flamboyant ‘comeback’ (Fig.1). In fixed income markets, the 100-day volatility of ten year treasuries reached 4.5%. We witnessed 20 year lows in foreign exchange volatility, while hovering above 10 year lows in equity volatility. The warning signs have been evident for some time as market complacency in some asset classes reached a peak as implied volatility fell to ridiculous levels. ![]() The subsequent global rout has finally forced the market to accept what a handful of market specialists have stressed for some time now, that the opportunities for macro strategies have been increasing as a result of the inherent disequilibrium of markets. ![]() Then the last two days of February shook up the status quo. Persistent lacklustre performance in this sector has not provided an incentive to lure participants back. It was only recently that industry pundits were conducting the post-mortem of the macro strategy, which never quite recovered from its association with the high-profile debacles of the 1990s. Not surprisingly, macro investing is perceived by many to be a risky, volatile investment strategy, a perception often fuelled by a media inclined to revel in ‘hedge fund meltdown’ stories. Macro investing is perhaps the most publicised of hedge fund strategies, due in no small part to the substantial headlines generated by managers such as George Soros and Julian Robertson. ![]()
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