Trends Watch: Systematic Global Macro Investing
- May 5, 2022
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Neil Ramsey, CEO and CIO, Ramsey Quantitative Systems Inc.
What is your outlook for systematic global macro investing?
There is a famous quote attributed to Lenin (which seems apropos for today) where he says, “There are decades where nothing happens and there are weeks where decades happen.” We are in the midst of those weeks. There are so many major micro issues related to market stability like the integrity of clearing exchanges such as the London Metal Exchange, and of course the major factors of a real risk of a new World War. At a minimum, we have accelerated the alignment of a free world against an oligarchic world. The long-term implications to trade are hard to imagine. It’s safe to assume that nationalism will continue to cause risk and cross border trade will take many steps back as nations work to become more self-sufficient for strategic needs. It’s hard to imagine a scenario that avoids a global slowdown with inflation still a risk. Nothing is worse for buy and hold investing than stagflation, which is why institutions will be forced to invest more heavily in liquid alternatives.
Where do you see the greatest opportunities in systematic global macro and why?
We do not see much opportunity in fixed income at the instant. It’s hard to short fixed income with steep yield curves and it’s even harder to take spread risk in a high-volatility low-rate environment. Obviously, commodities have been the proverbial manna for CTAs over the last 16+ months and will likely continue to be a source of opportunity. Global equities will probably remain very volatile, but it could be 9-to-15 months before it’s obvious we are in a recession with some markets entering this phase sooner and more deeply than others. It can feel like equities will never rally again but there will be some nice intermediate trends and lots of value gaps across global markets. Currencies have shown little opportunity for several years. I don’t really see that changing a lot. We are excited about the technical trading opportunity in crypto, but we are not sure how long that lasts as professional traders begin to crowd that space.
What about the greatest challenges in the space and why?
The challenges are pretty clear as we’ve seen over the last several weeks. A weak equity market is a grind. You get large bear market rallies that are hard to time. Commodities quit going up indiscriminately so outright trading gets more difficult. However, spread trading should remain strong. One of my biggest concerns is when a market like Chicago wheat or LME nickel becomes so overwhelmed with speculative traders, it becomes useless to commercial traders. It causes prices to disconnect from reality. This is not good for any market participants as these strike at the integrity of prices and exchanges themselves.
What keeps you up at night?
I think the question implies something about market risk or risks in my business but the reality is that the only thing that really keeps me up at night is unresolved conflict with someone that is important to me. But, to keep to the implied point, I’m always concerned about a surprise market move that catches us off guard when we have a large position. Since our investing style is purely systematic, I cannot help but occasionally question what we don’t know and what we missed in our modeling process. I don’t mind being wrong, but it feels terrible to be stupid and miss something we should have known.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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