U.S. institutional investors have global macro and managed futures managers firmly in their sights as they hunt for non-correlated investment strategies to add to their hedge fund portfolios.
A surge of institutional investment into global macro managers and managed futures strategies began last year and continues this year, as North American institutions play catch-up to their European counterparts by making new and additional allocations.
Among investors in these tactical trading strategies are the $48.1 billion Massachusetts Pension Reserves Investment Management board, Boston; the $18 billion Texas County & District Retirement System, Austin; the $144.8 billion California State Teachers' Retirement System, West Sacramento; the New Jersey Division of Investment, Trenton, which oversees the state's $67.2 billion in pension assets; the $6.5 billion Wyoming Retirement System, Cheyenne; and the $36 billion Illinois Teachers' Retirement System, Springfield.
Big winners of new and additional allocations from U.S. investors include global macro managers Brevan Howard Asset Management LLP, Bridgewater Associates LP and Caxton Associates LP.
Among managed futures firms, also known as commodity trading advisers, gaining favor are Winton Capital Management Ltd., BlueCrest Capital Management LLP and Graham Capital Management LP.
The popularity of tactical trading firms like those above stems from their ability to generate uncorrelated returns, a characteristic many institutional investors seek to add to their portfolios, money managers and consultants said.
“There have been strong correlations across asset classes and across hedge fund strategies in the last year. Opportunities for finding return through security selection are diminished when correlations are so high,” said Michael Bernstein, director and head of U.S. pensions and consultants at Lyxor Asset Management Inc., New York.
“The attraction of global macro managers is that they are less concerned with individual securities and instead are focused on getting the macro decision right. When nothing else is working, investors are willing to try something new that seems to work. They're trying to get more balance in their portfolios and global macro can add that,” Mr. Bernstein added.