Howard Marks: It’s Tough to Be Good at Macro Investing

Global macro hedge funds choose positions in various equity, fixed income, currency, commodities and futures markets based primarily on the economic and political views of various countries or their macroeconomic principles. According to last month’s Barron’s, they’ve suffered poor performance of late.

Last year, the article notes, the benchmark HFRI Macro Index returned only 1.29%, trailing the overall hedge fund index’s return of 5.51%.”Their relatively good performance amid the financial crisis in 2008 and 2009 helped attract money,” the article says, “but those days are over.”

Brian Shapiro, CEO and president of Simplify, a firm that researches hedge funds and other investments for clients, argues the importance of distinguishing between those macro funds that rely on “systematic computer-driven models” (that have fared well) and those that “make discretionary bets on various themes, including rates” (that have struggled).

HFR President Kenneth Heinz claims that 2017 will be a better year for macro funds, the article says, “partly owing to the Federal Reserve’s tighter monetary policy.” But Howard Marks, co-chairman of alternative-asset manager Oaktree Capital Management, argues that running macro strategies is extremely hard work and not many do it well (Oaktree doesn’t run any). He believes that “predicting future events, whether it’s presidential elections, NFL football games, or upcoming Fed policy” is very difficult.

“To make money,” says Marks, “you have to see something that others don’t. And you have to see the price of something and understand that it’s wrong and why. My history tells me that very few people have the ability to do that with regard to macro investing.”