Time could be right for global macro hedge funds, says Credit Suisse

Time could be right for global macro hedge funds, says Credit Suisse

Credit Suisse Liquid Alternatives, Alpha Strategies, has released a report exploring how the global macro hedge fund strategy has performed through market dislocations.

The global macro hedge fund strategy has the broadest investment scope and is typically the most flexible of all hedge fund strategies. It may be able to provide positive performance when conditions driving individual markets are in transition.

While certain other strategies may find it difficult to navigate market volatility, the report says global macro funds have been able to adapt to the changing regimes, with returns rising during certain periods following market dislocations.

The report found that global macro has been the top performing hedge fund strategy since the inception of the Credit Suisse/Tremont Hedge Fund Index in 1994, with an annualized total return of 12.57 per cent (as of 31 January 2009).

It says five factors have been instrumental in the strategy's out-performance: flexibility and tactical asset allocation; top-down investment style and macroeconomic focus; global opportunity set; aversion to less liquid credit and other non-liquid investments; and low 'participation risk' in crowded trades.

According to Credit Suisse, global macro hedge funds generated double-digit average returns in the first 12 months following several previous market dislocation events. They maintained this double digit performance on an annualized basis over the three years following each dislocation.

Global macro hedge funds outperformed hedge funds in general by over five per cent on average in the year following a market dislocation.

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