Question #9
Reading: Reading 34 Hedge Fund Strategies
PDF File: Reading 34 Hedge Fund Strategies.pdf
Page: 3
Status: Unattempted
Correct Answer: A
Question
Catalysts for global macro hedge funds outperformance include:
Answer Choices:
A. muted volatility in periods of quantitative easing and p/e multiples can expand across the globe
B. steep equity market sell-offs, interest rate changes, currency devaluations, volatility spikes and geopolitical shocks
C. low and stable interest rates, steady trending equity global markets and tight credit spreads
Explanation
Global macro hedge fund managers take investment positions based on their future
predictions of various global economic variables including inflation, currency exchange
rates, yield curves, central bank policies, and the general economic health of different
countries. These fund managers anticipate changes before other market participants and
then invest in a position and wait for the rest of the market to come around. Thus, this
strategy has aspects of a contrarian nature with some managers outperforming during
times of market stress.