The life of a macro trader is, in theory, one of the wildest rides in the financial sector. While most trading roles stick to relatively rigid rules or strategies, macro hedge funds have the flexibility to take broad views on global markets and have the resources to take aggressive action.
Macro trading has connotations of the glamour and rich pickings associated with the hedge fund sector – think George Soros, Brevan Howard, Tudor Investment Corporation and Caxton Associates. The reality of the job, however, is rather different – every day traders are battered with information overload on economic and market trends, and the key is to see through the noise to spot a trading opportunity, and doing this is more down to the skill of the individual than the culture of an organisation.
At least that’s the view of James Leitner, president of hedge fund Falcon Management Corporation. The key to success, he said at the LSE Alternative Investment Conference last week, is to be open to any possibility, rather than being married to one investment strategy or market theory.
“I will trade anything, I’m totally diversified and my views have nothing to do with what, say, the ECB is doing,” he said. “I’d go for Zambian T-bills, for example, keep an eye on beer consumption in Nigeria and the investment opportunities it presents or look to buy shares in a Turkish glass company after an earthquake.”
Not that Leitner is advocating a finger-in-the-wind investment philosophy. Macro trading is a highly technical process, and he outlined various mathematical and political ideals like Occam’s Razor and the importance of being an investment fox – open to all possibilities – rather than a hedgehog (viewing the world through a single lens and being ideologically rigid), based on Isaiah Berlin’s essay.
“Most people are focused on one thing, and don’t take in entire picture,” he argued. A case in point is this video:
Did you spot the moonwalking bear? If you did, you’re already beating most of the room at the LSE conference.
“We’re hard-wired to believe everything we hear. Look for disaffirming evidence,” says Leitner. “Something instantly slots in as a fact unless we take the time to look at the information and then decide that it’s not. I’m sent thousands of analyst notes every day, but being flooded with information does not make you more accurate, it just makes you more confident in your outlook.”
Macro traders have to be on the ball 24 hours a day and consume, filter and act upon vast amounts of data. The result is that it has the reputation of being one of the most stressful finance jobs out there.
Leitner, however, disagrees: “The job is not stressful, I have no trouble sleeping and it’s an amazingly great job. Of all the sales and trading jobs out there, it’s the most interdisciplinary and your trades are not always mathematical or completely clear.”