Why Macro Trading?

Like most investors we started out as plain vanilla stock traders. Initially we did value investing and then over time gravitated more over to momentum/CANSLIM investing with a twist. We wanted higher and more consistent returns so we kind of blended some value principles into the momentum investing and ended up with a GARP-growth at a reasonable price methodology. By demanding at least some value we were able to lower our risk profile quite a bit and didn’t really give up any of our gains. In fact the equity curve was very smooth for some time.

Of course most good things come to an end and we found that in the summer of 2000 we were getting tired of being almost entirely out of the market and not being able to make money. So we started doing a lot more work into who and what was making money. In the stock arena some of the value guys were starting to do well and the short sellers of course did great. But what really got our attention was when we looked at different markets and hedge fund performance tables. The number one strategy was global macro trading and we saw several well known names on the list. Bruce Kovner at Caxton, Paul Tudor Jones at Tudor, and Louis Bacon at Moore were all doing well with smooth equity curves.

The more digging we did the more we saw that in almost every bear market global macro was one of if not the best performer. And they did well in “normal” markets as well generating returns basically all of the time. While the returns were indeed lumpy they had very few and very low drawdown’s. This appealed to us as we hate losing money, so any approach that focuses on risk management appeals to us.

Over time we decided to do everything that we could in order to learn how to effectively trade and model bonds, commodities, and currencies as well as how to effectively manage risk in each of these asset classes. We also did a lot more work into learning about real asset allocation and real diversification. Over time we have added several sub strategies to our arsenal where we have anything from entirely technical to entirely fundamental model with everything in between to help us to get an edge.

Since early 2001 we have been global macro traders and have been successful in both good and bad markets. We are able to do this by not being wed to any one market and instead being true capitalists looking for the best risk to reward opportunities on the globe. We think that global macro trading is the best strategy in existence as it gives enough flexibility to do anything you need to do to generate positive returns.