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Book Review: Global Macro Theory and Practice

November 21, 2012 1 comment

Perhaps most of you have heard of the term Sovereign Wealth Fund (SWF). It was a term coined by Andrew Rozanov in 2005 to describe government-owned funds that invest in whole or in part outside their home country. Global Macro Theory & Practice is a book compiled and edited by Rozanov, an expert and advisor to sovereign wealth funds and intuitional investors on asset allocation, portfolio construction, risk management and alternative investments. Contributors include current practitioners from discretionary and systematic managers, prime brokerage specialist, investment consultants, funds of funds (FoFs) managers and institutional investors.

The book begins with a brief overview of the origins of Global Macro investing starting from John Maynard Keynes who managed the King’s College endowment fund at Cambridge to hedge fund legends in the late ’80s and ’90s, such as George Soros, Michael Steinhardt, Julian Robertson, Louis Bacon and the ‘Commodities Corporation Mafia’. The Commodities Corporation (acquired by Goldman Sachs Asset Management) has produced legendary traders such as Paul Tudor Jones, Bruce Kovner, Michael Marcus, Ed Seykota and Jack Schwager, author of the Wizards quadrilogy books on trading. The author touched briefly on some of these traders who have really come to epitomise the term Global Macro in the late ’80s, ’90s and early part of the noughties. Those interested in reading more on the trading styles of these global macro legends should refer to books by Jack Schwager. This chapter concludes with the future prospects of global macro.

The next two chapters are written by a discretional macro manager and a systematic macro manager. They cover asset allocation, CTAs and the differences between systematic and discretionary macro strategies.  The fourth chapter provides more colour to the different shades of Global Macro investing and how it fits in within a global tactical asset allocation (GTAA) profile. The fifth chapter evaluates the role of a global macro strategist from behavioural school economics’ standpoint.

Chapter six covers global macro in the emerging markets context with rich examples from relatively recent economic developments. Chapters seven and nine offer perspectives from a risk manager and prime brokerage specialist whilst chapter eight describes a theoretical framework for navigating geopolitical risks. The last four chapters bring together various elements of global macro investing, its inherent leverage and the case for global macro in institutional portfolios.

This book is the first of its kind to attempt to shed light and build a framework to describe current global macro practices – ‘a loose term that has come to mean different things for different investors’.  As global macro investing continuously evolves, this book offers a fresh look through the prism of leading current practitioners in the field that is grounded in both theory and practice.

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