Global macro investing and tactical asset allocation have a lot it common. They are both trying to be in the best asset classes at the right times. In fact some practitioners can fit into both categories.
Global tactical asset allocation is a dynamic asset allocation process. Instead of just deciding on an optimal allocation and rebalancing each year the tactical asset allocator will attempt to take advantage market dislocations in order to generate higher returns and even more importantly do it with less risk. Global tactical asset allocators will build valuation and risk models for every market they can find and then allocate depending upon which asset shows the most potential.
Tactical asset allocation and global macro investing have a lot in common. Where the asset allocator will have X% in stocks and X% in bonds and then adjust as opportunities arise, the global macro investor will only invest where there are good risk to reward opportunities.
Another thing that sets the asset allocator apart from the global macro trader is that they usually have a lot longer time horizon. Most macro traders run hedge funds and have to meet quarterly and annual goals and benchmarks. Most asset allocators have a lot longer of a time horizon. In fact most of them have three to five years and some, such as endowments, theoretically are supposed to last forever. Because of this some of their shifts are very subtle and yet over time can add significantly to their returns.
Tactical asset allocation tries to combine standard asset allocation along with global macro trading in order to achieve higher returns then buy and hold while holding less than market risk. As anyone that has traded for a long time knows, risk reduction is one of the best things that traders can do to improve their results.
Since tactical asset allocators and global macro traders have so much in common it makes sense for both of them to learn from each other and use the useful tools and methods they have developed. Most traders would be wise to adopt tools from a variety of practitioners.
Combining asset allocation principles along with global macro strategies can help you in your investment results. The truth is that anytime you can do something to get a better grip on true value of an asset class and the potential return the better off you are. If you are into global macro then you are well advised to look into tactical asset allocation as well.
Global tactical asset allocation is a dynamic asset allocation process. Instead of just deciding on an optimal allocation and rebalancing each year the tactical asset allocator will attempt to take advantage market dislocations in order to generate higher returns and even more importantly do it with less risk. Global tactical asset allocators will build valuation and risk models for every market they can find and then allocate depending upon which asset shows the most potential.
Tactical asset allocation and global macro investing have a lot in common. Where the asset allocator will have X% in stocks and X% in bonds and then adjust as opportunities arise, the global macro investor will only invest where there are good risk to reward opportunities.
Another thing that sets the asset allocator apart from the global macro trader is that they usually have a lot longer time horizon. Most macro traders run hedge funds and have to meet quarterly and annual goals and benchmarks. Most asset allocators have a lot longer of a time horizon. In fact most of them have three to five years and some, such as endowments, theoretically are supposed to last forever. Because of this some of their shifts are very subtle and yet over time can add significantly to their returns.
Tactical asset allocation tries to combine standard asset allocation along with global macro trading in order to achieve higher returns then buy and hold while holding less than market risk. As anyone that has traded for a long time knows, risk reduction is one of the best things that traders can do to improve their results.
Since tactical asset allocators and global macro traders have so much in common it makes sense for both of them to learn from each other and use the useful tools and methods they have developed. Most traders would be wise to adopt tools from a variety of practitioners.
Combining asset allocation principles along with global macro strategies can help you in your investment results. The truth is that anytime you can do something to get a better grip on true value of an asset class and the potential return the better off you are. If you are into global macro then you are well advised to look into tactical asset allocation as well.
About the Author:
Dagny helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.
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