Key Global Macro Hedge Funds to Follow
Generate investment ideas by following the best
Taking cues from longstanding hedge funds can help you formulate investment strategies. Many hedge funds around the world generate alpha using several different strategies, ranging from arbitrage to short selling. In laymen's terms, alpha simply refers to beating the market when compared to a benchmark index, such as the S&P 500. Over the past years, global macroeconomic (global macro) investing has grown increasingly popular due to the turbulence affecting many parts of the world. Many of these funds must regularly report their largest holdings to the U.S. Securities and Exchange Commission (SEC), which creates an opportunity for investors to piggyback on the knowledge.
According to Pensions and Investments, Bridgewater Associates is ranked as the number one hedge fund in terms of Assets Under Management (AUM). Through June of 2020, the firm had nearly $99 billion in AUM. This is down sharply from 2019, some 25%, largely due to the economic impact of the global pandemic. Bridgewater is a global macro hedge fund that invests based on economic trends, such as inflation, exchange rates, and U.S. gross domestic product readings. As early pioneers of currency overlay strategies, absolute return products, and risk parity concepts, the hedge fund was among the fastest-growing asset managers in the world 2000–2005. The company continues to be ranked first in Institutional Investors’ World's Top 100 Hedge Funds, retaining the top spot on that list for nine consecutive years.
Caxton Associates is a global macro hedge fund that makes investments based on its analysis of worldwide economic trends. According to a Financial Times interview with CEO Andrew Law, the hedge fund is largely focused on three core principles: listening to the markets, paying attention to politics, and effectively managing risk to improve long-term returns.
While the hedge fund experienced some redemption issues early in its history through 2008, it has since made more than $13 billion for its clients—or 14% annually—with half the volatility of the S&P 500. That makes it a leader among global macro hedge funds and a solid performer among all hedge funds in general. Notably, the company never truly restricted redemptions either.
Soros Fund Management
Soros Fund Management is a hedge fund that was reclassified as a “family office,” which is run by the legendary billionaire George Soros. In addition to breaking the Bank of England back in 1992, netting more than a billion pounds in a single day, he has averaged a 20% annual rate of return, making the fund one of the best performing in the industry.
The fund is focused on investing in public equity and fixed income markets worldwide, as well as foreign exchange, currency, commodities, private equity, and venture capital funds. The company has large investments in transportation, energy, retail, finance, and other industries, which makes the investments worth following moving into the future.
How to Read SEC Filings
The most important SEC filing for international investors to watch when analyzing hedge funds is the Schedule 13F filing, which contains a detailed record of a fund's largest holdings. By comparing these holdings between two periods, investors can determine what stocks, funds, or other assets were purchased or sold over time.
Many websites, such as Whale Wisdom or Holdings Channel, aim to simplify this process by automating the comparison of assets between periods, but investors while somewhat more cumbersome, can find the information for free on the SEC's website. Investors can also set up email alerts to be notified when SEC filings from many different companies are made public.
While Schedule 13F filings must be made regularly, note that there is a delay between the fund buying an asset and disclosure of that purchase in regulatory filings. Investors should be sure to compare the price paid by the fund at the time of purchase to the current market price to assess whether the anticipated movement has already occurred.
The Bottom Line
International investors can glean a lot of insights by following the investments made by leading global macro hedge funds. In addition to these three funds, investors can take a look at the SEC filings associated with many other funds to create lists of stocks to watch as an alternative to investing in broader market exchange-traded funds (ETFs) that may not offer quite as much alpha.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.