Investors have been showing a growing interest in macro strategies, given their performance potential within the broader challenging macroeconomic environment. Within this context, emerging macro funds have the capacity to grow, as investors hunger for pure macro allocations at a reasonable cost.
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Investors have been showing a growing interest in macro strategies, given their performance potential within the broader challenging macroeconomic environment. Within this context, emerging macro funds have the capacity to grow, as investors hunger for pure macro allocations at a reasonable cost.
“We have generally observed more interest in macro strategies, with investors expressing a preference for greater transparency and liquidity within such approaches. Clients are also showing a growing appetite for separately managed accounts,” comments Pascal Kummert (pictured), founder and CIO, Calvion Capital, winner of the Best Emerging Macro Manager title at the Hedgeweek US Awards 2022. This is the firm’s second win, having been awarded the title of Best Macro Fund- Americas in 2021.
Multi-strategy funds are in fierce competition with existing funds and any potential new launches, especially in the macro arena. However, Kummert outlines how allocators who need pure macro allocations in their portfolio may struggle to find such exposure at reasonable fees without the lockups demanded by large established macro funds. “This opens up a supply gap for emerging macro funds to grow into,” he says.
However, these smaller funds are also facing headwinds. Macro strategies perform best when investors are at their most defensive and least willing to allocate capital in general. This should be considered in a context of rapidly increasing cost of talent and services within a highly inflationary period. “Eroding operating budgets mean clients are unlikely to allow management fee increases, which is a challenge for smaller, emerging funds,” Kummert notes.
From its perspective, Calvion Capital navigates these challenges through its distinct approach and unique tools. The firm integrates fundamental research with proprietary quantitative and Natural Language Processing (NLP) systems to reflect the importance of alternative data and signals outside the typical macro toolkit, and express the team’s investment decisions globally on a cross-asset basis.
According to Kummert, the current regime of volatile markets and a “higher for longer” Fed paradigm, the industry is likely to see continued demand for macro strategies. This is particularly relevant, given that this environment is highly disadvantageous to most hedge fund strategies, apart from macro funds.
“We are in a prolonged inflationary period with geopolitical tensions that will reverse some low-cost benefits of globalisation. This comes as the prolonged period of easy money led to bubbles and high strategy correlation between systematic, passive, short vol, long duration tech stocks, etc,” he says.
The team at Calvion sees this period of central bank tightening as a wakeup call to allocators – a justification for discretionary investing.
Going forward, Kummert and his team of investment professionals expect markets to remain choppy. “In this climate, it’s better to have alert, adaptable and experienced stewards of capital at the helm, rather than passive strategies or algorithms that have unknown biases from being trained on past time frames that do not apply to our current and future investment paradigms,” he concludes.
Pascal Kummert, Founder, Calvion Capital – Pascal Kummert founded Calvion in New York in 2017 and has 14 years of professional investing and trading experience. Previously, he was an Executive Director in the Interest Rates Products (IRP) division at Goldman Sachs in London, where he specialised in cross-asset macro, specifically trading government debt and credit derivatives from European and Emerging Market countries, as well as global currencies, interest rate swaps and equities. Prior to this, he held a similar role as a Vice President in the Fixed Income Division (FID) at Morgan Stanley, where he traded bonds and credit default swaps of peripheral countries (Greece, Portugal, Italy, Spain and Ireland) during the European debt crisis. He started his career in Morgan Stanley’s Investment Management Division as an investment analyst for the Special Situations (SSF) and Real Estate Private Equity funds (MSREF). He grew up in South Africa, holds a Bachelor of Science in General Management from the European Business School in Germany and studied Finance at the Hong Kong University of Science and Technology (HKUST).
