Fund selectors speak out on global macro strategies, tradability, and managed futures
Javier Uribarren at Stenham, Nizam Hamid at Lyxor AM, and Michael Azlen at Frontier Investment Management are among the selector voices speaking out on global macro strategies, tradability and managed futures.
Sweetening global macro funds
Name: Javier Uribarren
Title: Investment director
Is there an ideal size for global macro funds?
All else being equal, a larger asset base is a hindrance to future returns. But because of their liquidity, global macro funds should be able to run more than those investing in other hedge fund strategies.
If we felt a manager’s ability to derive returns is compromised by its asset size, we would strongly consider redemption.
The first half of 2011 was challenging for global macro. The rally in the euro towards the start of 2011 was at odds with the deteriorating outlook for peripheral countries in the EU.
In the third quarter, as these countries came under pressure to show monetary and fiscal restraint, investable trends developed and the fundamental outlook became more accurately reflected in pricing of financial assets. This environment is ideal for global macro strategies.
Name: Nizam Hamid
Title: Head of ETF strategy
Company: Lyxor AM
How are investors using ETFs in this time of crisis?
The eurozone crisis has highlighted the tradability of ETFs. In the equity space, we have seen investors focus on individual countries, and this has been evident in both asset gathering and trading trends.
Recently, Euro Stoxx 50 flows have picked up significantly as investors’ perception of risk has shifted back to eurozone equities as a whole.
Fixed income ETFs have also benefited, with investors looking to diversify various aspects of sovereign credit risk while managing risk in broad multi-asset portfolios.
In the context of not just the eurozone crisis but risk attitudes as a whole, investors have also looked at volatility ETFs as a means of capturing market risk and providing an efficient portfolio hedging tool.
Name: Michael Azlen
Title: Founder and executive chairman
Company: Frontier Investment Management
Are managed futures hedge funds useful beyond being an ‘insurance policy’ in difficult markets?
Managed futures funds have seen a surge in popularity following their performance in recent equity downturns.
It is one of the few investments not to show increased correlations to other asset classes.
These low correlations are due to the market momentum or trend following strategies that managed futures tend to pursue.
As such, the asset class can produce positive performance when there is a strong, consistent trend in either direction.
Looking back over the past 30 years, the managed futures sector has produced positive returns with low to strong negative correlations in equity bear markets, but has also delivered positive performance with low or strong positive correlation in equity bull markets.
We view a significant allocation to managed futures as an important addition to diversified portfolios at all times, not just in difficult markets.