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.
Regular asset allocation will decide upon a fixed percentage of asset in each category and then rebalance once a year in order to keep the allocation the same. Global tactical asset allocators will instead look at the prospects for each asset class and then allocate. As things change they will then change the allocations. Essentially a tactical asset allocator is like a global macro trader because they will look for the best opportunities and then sale up or down as the case may be.
Obviously tactical asset allocation has a lot of similarities with global macro investing. The primary difference is that with global macro you don't feel the need to allocate to any market where you dont think the rewards outweigh the risks.
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.
In the pursuit of higher returns and lower risk global tactical asset allocators try and blend standard asset allocation with the global macro ideas of looking at all asset classes everywhere for the best possible risk to reward opportunities.
All global macro traders can benefit from the models, ideas, and research done by tactical asset allocators. By looking at their methods global macro traders can find more and sometimes better ways to find profitable long term investing opportunities.
Asset allocation while flawed as a stand alone strategy fits in well with the tactics of global macro trading in concept. After all global macro uses all of the liquid asset classes already. The better that you are able to find which ones will outperform and which ones will underperform the better you will be able to get higher returns with lower risk.
Regular asset allocation will decide upon a fixed percentage of asset in each category and then rebalance once a year in order to keep the allocation the same. Global tactical asset allocators will instead look at the prospects for each asset class and then allocate. As things change they will then change the allocations. Essentially a tactical asset allocator is like a global macro trader because they will look for the best opportunities and then sale up or down as the case may be.
Obviously tactical asset allocation has a lot of similarities with global macro investing. The primary difference is that with global macro you don't feel the need to allocate to any market where you dont think the rewards outweigh the risks.
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.
In the pursuit of higher returns and lower risk global tactical asset allocators try and blend standard asset allocation with the global macro ideas of looking at all asset classes everywhere for the best possible risk to reward opportunities.
All global macro traders can benefit from the models, ideas, and research done by tactical asset allocators. By looking at their methods global macro traders can find more and sometimes better ways to find profitable long term investing opportunities.
Asset allocation while flawed as a stand alone strategy fits in well with the tactics of global macro trading in concept. After all global macro uses all of the liquid asset classes already. The better that you are able to find which ones will outperform and which ones will underperform the better you will be able to get higher returns with lower risk.
About the Author:
Dagny helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is one of the many concepts that TheMacroTrader.com uses to find great investment opportunities.
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