The outlook for the global economy and geopolitics has seldom seemed so uncertain, and that has been reflected in high levels of market volatility this year. Given that market turbulence could well continue, investors are looking towards global macro hedge fund strategies, which have traditionally performed well during periods of elevated volatility.
The global macro hedge fund strategy rides to the rescue again
Global markets have encountered significant volatility this year, and the turbulence may well continue given that the underlying cause – the capricious nature of US economic policymaking – is unlikely to disappear soon. In May, for example, President Trump’s sudden decision to impose 50% tariffs on EU exports to the US caused global stocks to fall precipitately.1 He later paused the tariff hike, causing markets to rally.
We also appear to be entering a new era of geopolitical uncertainty, with the US commitment to NATO now being questioned and President Trump taking policy stances – such as threatening to annex Canada and Greenland, and an equivocal attitude to Ukraine – that suggest the world order in place since the end of the Second World War is over. Add in the Chinese threat to Taiwan and various European military and political leaders warning that Russia could challenge NATO in the coming years, and the outlook for the globe has seldom appeared more unsettled.
The sudden movements in asset prices in reaction to all these developments clearly presents a challenge to global investors. Indeed, the VIX index, which represents the market’s expectations for the relative strength of near-term price changes in the S&P 500 index, hasn’t spiked by so much since the outbreak of the pandemic or the global financial crisis. Between 10 April and 12 May 2025, the VIX declined from above 40 to below 20 at the fastest rate on record.2
The VIX Index 2004-2025
Fixed-income markets, traditionally relied upon to provide an anchor in a 60/40 portfolio, have also experienced sharp gyrations. The yield on the 10-year Treasury surged to a high of 4.8960 in early January, only to fall to a low of 3.8600 in April, following Trump’s ‘Liberation Day’ unveiling of his global tariff schedule.
Meeting the challenge of volatility
Investors seeking to diversify away from traditional portfolios – such as the 60/40 model – in the face of this turbulence could do well to consider global macro hedge fund strategies. These strive to capture opportunities in market changes driven by economics and geopolitics. The managers make investment decisions based on their top-down economic and political views, considering factors such as economic growth, interest rates, inflation, government policy and geopolitics when constructing their portfolios. Relative valuations of financial instruments within or between asset classes can also play a role in the investment process. The strategy deploys both long and short positions, thereby potentially benefiting when markets gain and when they fall.
Global macro was the second-strongest performer among major hedge fund strategies in the first quarter of 2025.3 According to Alternatives Watch, macro hedge fund strategies profited from a mix of short wagers against US equities and long bets on selected Chinese names – particularly in technology – while also building tactical positions in US fixed income and gold.4 Moreover, according to Reuters, citing data from the hedge fund research firm PivotalPath, global discretionary macro managers not using systematic trading to come up with trade ideas posted around a 7% return on investment through April 2025, compared with a flat performance by the wider universe of hedge funds.5
In the year to September 2024, by contrast, as we discuss in our 2025 State of the Hedge Fund Industry report, global macro provided positive returns but certainly wasn’t the most successful strategy.
Hedge fund investors already seem to have decided that macro strategies are a good option, given the uncertain outlook for geopolitics and economics. A Société Générale survey of 322 firms published in May 2025 found that half would consider putting their money into discretionary global macro hedge funds in the next 12 months. The number of respondents expressing interest in macro hedge funds rose by around 9% compared with the bank’s previous survey, in autumn 2024.
Lessons from the past
The performance of macro strategies during past periods of extreme volatility suggests investors are right to plump for this option. During the pandemic, for example, global macro was among the top-performing strategies.6 In 2008, during the global financial crisis, hedge funds fell by 18% overall, with nearly all major strategies posting negative returns. The one exception, according to the Hedge Fund Journal, was the category known as macro strategies, which gained 7% for the year.7
As with any strategy, there are, of course, risks. In the case of global macro, the strategies are heavily reliant on the expertise and judgement of the managers, who make investment calls based on their forecasts for the direction of global economies and geopolitics, etc. As the Hedge Fund Journal says, ‘the world is a dynamic and complex place and systematically “getting it right” utilising superior forecasting insights is extraordinarily challenging… even if it is fun trying!’ 8
Global macro strategies have also found benign and predictable market environments more challenging because macroeconomic factors are less relevant in such periods and market volatility is subdued, according to the hedge fund investment specialist Aurum. So, should the world suddenly become less volatile, macro funds could struggle.
Sources
1 https://www.reuters.com/business/trump-extends-deadline-reach-eu-trade-deal-until-july-9-2025-05-25/
2 https://www.investopedia.com/why-the-stock-market-fear-index-has-normalized-faster-than-ever-before-vix-11736532
3 https://www.etftrends.com/portfolio-strategies-channel/global-macro-top-hedge-fund-2025/
4 https://www.alternativeswatch.com/2025/05/05/100-days-trump-hedge-funds-capitalize-new-macro-paradigm-shorts-longs-bridgewater/
5 https://www.reuters.com/markets/wealth/hedge-flow-hedge-fund-investors-want-managers-who-trade-macro-says-socgen-survey-2025-05-30/
6 https://ideas.repec.org/a/bas/econst/y2022i1p18-37.html
7 https://thehedgefundjournal.com/an-industry-still-in-crisis/
8 https://thehedgefundjournal.com/the-wrong-type-of-macro/
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