Advisors and investors seeking out alternatives for portfolio diversification shouldn’t overlook global macro hedge fund strategies. With a history of reduced volatility, performance enhancements, and loss mitigation, the strategy is a diversifier worth adding to portfolios, particularly when done through an ETF.
Global macro managers take positions across a range of asset classes that include currencies, commodities, stocks, bonds, and credit. These strategies invest based on macroeconomic risks and opportunities by taking long and short positions in markets. This means that the strategy can potentially benefit from rising and falling markets. It leads performance with reduced correlations to traditional 60/40 portfolios, making them a worthwhile diversifier.
“If an investor held a 20% allocation to the strategy, from the period of 2002 to present they would have experienced improved performance, lower volatility, and less meaningful drawdowns in depth and duration, a pretty attractive combination of diversification benefits,” Bob Elliott, CEO and CIO of Unlimited, said in a recent "blog post.":https://www.unlimitedfunds.com/considering-the-benefits-of-global-macro-alpha/
The ability to short an asset means a manager can profit on price declines. Historically, during market crashes, global macro strategies broadly experience significantly less drawdowns than long-only strategies, Elliott explained.
The benefits of the strategy aren’t limited to just down markets, either. “The complimentary attributes can create a strategy with the ability to maintain value during challenging market environments and generate positive returns during positive market environments,” said Elliott.
Invest in Global Macro With the Benefits of an ETF
The Unlimited HFGM Global Macro ETF (HFGM) seeks to capture mispricing within global markets. The fund takes long and short positions across equities, fixed income, currency, credit, and exchange rate markets. It seeks to capture the alpha potential of global macro hedge funds with the tax efficiency and fee savings of an ETF wrapper.
HFGM uses a proprietary, data-driven approach that seeks to identify hedge fund global macro managers’ current positions. It then replicates the positions in its portfolio, investing in long and short positions in futures contracts and a basket of ETFs. The ETF offers similar returns to the hedge fund sector with twice the volatility of the sector, a strategy that may yield outperformance.
HFGM targets the global macro portion within the firm’s Unlimited HFND Multi-Strategy Return Tracker ETF (HFND ). HFND captures a range of hedge fund strategies within a single fund. HFGM is managed by Bob Elliott, who brings more than two decades of systematic global macro investing experience to the table. The fund has a management fee of 1.00%.
For more news, information, and analysis, visit our Portfolio Strategies Channel.
