Credit Suisse hedge fund appetite survey - the ascent of global macro

The Credit Suisse 2015 survey of hedge fund investing appetite showed a marked change in demand with Global Macro being the number one strategy in demand and CTA's coming in number three. The other three strategies in the top five are event driven, long/short fundamental equity and equity market neutral. The strategies that are least in demand are leveraged credit and convertible bond strategies.

A look at the change from the prior year shows the three biggest increases in investor demand are with managed futures, global macro, and commodity strategies. This increase in demand is coming at the expense of equity strategies.

The three key factors that are driving demand decision by hedge fund investors are: high net returns, low correlation, and reduced volatility. Investors will receive those factors from higher allocations in global macro if there is corresponding increase in volatility across all asset classes.

It is often hard to say what are the specific drivers for demand in global macro beyond a higher volatility environment. We will suggest that there are two major reasons for the increased appetite, an increased in interest in currency and fixed income. For currencies, the divergence in monetary policy across the globe is causing currency volatility and opportunities to increase. For fixed income, an expected back-up in rates from Fed normalization means fixed income trading outside of credit is back in vogue.