Global Macro rose up

Although losses and redemptions are drastically shrinking the entire hedge fund world, global macro funds are garnering more interest because of their stronger returns and easy availability of liquidity.

Global macro funds — which make broad bets, such as playing one country’s currency or stock market indexes against others, often using derivatives — are one of the only strategies tracked by the Hennessee Hedge Fund Index that has posted a gain in 2008, including a rise of 1.23% for November. With cash reigning as king these days, investors are shunning funds that cannot return principal quickly, like those that specialize in fixed-income investments or merger arbitrage situations.

If you look at the performance of hedge funds, global macro guys have shown the best performance. Among the leaders, a $15 billion global macro fund run by Brevan Howard Asset Management gained 3.7% in November, and is up 21.2% for the year.

It’s not just high-net-worth clients, who can change direction of their money quickly, who are looking more at global macro. Larger investors, like pension funds and hedge funds of funds, have put global macro at the fore of their 2009 plans. Overall, macro strategies accounted for $300 billion, or 19%, of total industry assets of $1.564 trillion on Oct. 31, up from 15% at the end of 2007.

They trade in liquid markets, like futures, with an event horizon of two hours and two weeks. This enables them to take advantage of this short-term choppiness the market has presented better than most.

The hedge-fund allocation is currently shifting from one that invests mostly in hedge funds of funds to a strategy that invests in hedge funds directly. And, in the move to specific hedge funds, tactical trading, global macro funds and Commodities Trading Advisers, or CTAs, could see a significant increase.