Tactical Investment Strategies
What are they?
These programs tend to focus on fundamental drivers and relative values among the world’s major asset classes — stocks, bonds, currencies, and commodities — and can be either quantitatively driven or discretionary. Both quant macro and discretionary macro strategies tend to trade in liquid markets.
Sometimes known as CTAs, managed futures programs are distinguished mainly by their regulator (the CFTC) and by the markets they trade (futures and currencies). These programs tend to be quantitatively driven and much of the industry’s performance can be explained by the heavy weight given to momentum trading or trend following.
Commodities managers use both systematic and discretionary trading processes that employ a mix of both futures and physicals markets. Trades can be directional or spreads, and depending on their use of relatively illiquid physicals markets, these programs can be less liquid than the typical macro or managed futures program.
These programs tend to exhibit very low, or even negative, correlations to equities, bonds, and hedge funds, thus affording strong diversifying benefits for traditional institutional equity/debt portfolios.
Because the markets these programs tend to trade are deep and liquid, it is possible for these programs to offer exceptional liquidity. An increasing number of programs offer daily liquidity.
Because the markets these programs trade are both liquid and transparent, it is often possible to know the market value of a program on a nearly real-time basis. Furthermore, the practice of managed accounts also allows position level transparency and greatly enhances your capacity to manage risk.