With increasing hedge fund ETF choices, investors would do well to consider global macro for its performance across market cycles.
Global macro hedge fund managers invest across a variety of asset classes, taking both long and short positions. This offers a diversified portfolio with low correlation potential to traditional 60/40 portfolios. Asset classes invested in include equities, fixed income, currencies, commodities, and credit.
Unlike traditional investing strategies with long-only positions, hedge fund managers also short asset classes they anticipate will underperform. In turn, portfolios potentially benefit from market declines in addition to market gains.
“This approach gives these managers the opportunity to generate alpha independent of the direction of the US equity and bond markets, decreasing the correlation to traditional long only strategies,” explained Bob Elliot, CEO and CIO of Unlimited, in a recent blog post.
In addition to diversification potential, the strategy offers performance competitive to that of 60/40 portfolios — when captured at ETF fee levels. What’s more, it proves resilient during market drawdowns while still capturing upside in positive momentum markets.
“These returns on par with 60/40 have come with lower monthly volatility, and likely even more important for many investors, more limited drawdowns seen in many long-only strategies,” Elliot noted.
Harness Global Macro Alpha Potential With the Savings 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 global macro hedge fund sector with twice the volatility of the sector, a strategy that may yield outperformance.
HFGM teases out the global macro segment of the firm’s Unlimited HFND Multi-Strategy Return Tracker ETF (HFND ), which captures a range of hedge fund strategies within a single fund. HFGM is managed by Bob Elliott, CEO and CIO of Unlimited, who brings more than two decades of systematic global macro investing experience to the table. The fund has a management fee of 1.00%.
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