Michael Remigino, Senior Managing Director at Graham Capital Management, joined Keith Black, Managing Director of RIA Channel, at the CAIS Summit, to discuss the diversifying power of global macro investments.
Graham Capital has managed global macro hedge fund assets for thirty years, with an AUM of $20 billion. Graham’s two business lines include quantitative or systematic macro trading programs and discretionary global macro trading teams. Macro trading includes long and short positions across equity, bond, currency, and commodity markets.
Stock and bond correlations increased in 2022, reducing the diversification benefit of that asset pair. While stock and bond returns have experienced negative correlations since 2000, there is no guarantee that the relationship will persist. In fact, that correlation was positive for much of the 1960s, 1970s, and 1980s.
Advisors today are looking for uncorrelated sources of alpha, which could be accomplished through macro trading. Macro hedge funds have historically profited in both bull and bear equity markets, providing diversification and reduced portfolio drawdowns. Macro strategies will likely underperform stocks in a low-volatility equity bull market but seek to add value in equity bear markets.
Today’s market provides macro trading opportunities created by global interest rate differentials, rising Japanese rates, potential Chinese deflation, fiscal policy uncertainty, and geopolitical conflicts. Remigino encourages advisors to consider a long-term allocation to macro strategies, as it can be difficult to time when macro strategies will outperform stock and bond market investments.
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