Discretionary Macro vs. Systemic Macro

Steven Brod

Steven Brod CEO and CIO of Crystal Capital Partners

Investor appetite for macro hedge fund strategies has grown meaningfully in recent years. At the end of last year, a Société Générale survey found that global macro was at the top of institutional investors’ hedge fund allocation lists for 2025.¹ Yet performance in the first half of this year may have given allocators pause: macro managers have posted sharply divergent results amid renewed market volatility.² The answer isn’t to sidestep macro altogether, it’s to understand the differences between strategies and recognize that diversification is key to building a more resilient portfolio.

The hedge fund industry is projected to reach $5 trillion by 2028,³ and we can expect that macro strategies will capture a significant share of this expansion. Allocators will likely be drawn in by strong returns and the appeal of strategies designed to thrive amid global instability. For example, PivotalPath’s Global Macro Index ended December 2024 up +1.6%, with a full-year gain of +6.2%, helped by anticipated future currency volatility and policy divergence among central banks.⁴

Before allocating, it’s crucial to understand the differences between macro hedge fund strategies. Discretionary and systematic (also referred to as “quant”) macro funds follow different paths to returns and come with distinct advantages and risks. Discretionary macro strategies emerged in the 1970s, relying on top-down, human-led analysis of macroeconomic and geopolitical trends. Managers interpret policy signals and market developments to position portfolios. Systematic macro strategies evolved later, in the 2000s and 2010s, alongside and as a product of advances in computing and data. Systematic managers utilize large datasets and statistical models to uncover patterns and generate trade signals, increasingly with the help of AI, and trades are actioned algorithmically, not by human portfolio managers.

Global macro managers have seen wide performance dispersion this year, and so far, discretionary macro has outperformed. The HFRI Macro: Discretionary Thematic Index is up +7.51% YTD through July, while the HFRI Macro: Systematic Diversified Index is down -7.59% YTD through the same period.⁵ PivotalPath has also found that discretionary macro players are the only hedge fund strategy group to have produced double digit returns this year, reporting that its Global Macro: Discretionary Index was up +11.1% YTD through June.⁶

The divergence between hedge fund macro strategies is also particularly clear when looking at April performance – a month that saw significant volatility following April 2, when President Trump announced sweeping “Liberation Day” tariffs. The HFRI Macro: Discretionary Thematic Index jumped 1.4%, while the HFRI Macro: Systematic Diversified/CTA Index was down an estimated -4%.⁷

This performance has been translating into allocation interest: a Société Générale survey of over 300 hedge fund investors published in May found that 50% would consider putting their money into discretionary global macro hedge funds in the next 12 months, up from 42% who said the same in the fall of 2024. 31% said they would consider putting money into quant macro funds, down from the 35% who said the same in fall 2024.⁸

However, while this data appears to tell a simple story, the reality is more nuanced. Discretionary macro strategies can shine during inflation shocks or geopolitical crises, but may be more concentrated, making them potentially riskier than a systematic global macro portfolio.⁹ Systematic strategies can excel when persistent trends develop in rates, currencies and commodities, but may struggle during structural regime shifts or in less liquid markets.

In today’s shifting environment, neither approach should be favored exclusively. The two strategies typically have low correlation to each other,¹⁰ and diversifying portfolios to include both strategies can significantly reduce portfolio volatility. Allocators can benefit from a wider range of alpha sources - high-conviction trades from experienced portfolios managers and data-driven statistical signal generation.

For family offices and financial advisors seeking exposure to macro hedge fund strategies - a tempting diversifying offer in the current uncertain environment - it’s clear that a hybrid allocation that includes both core strategies can offer complementary sources of return and help build a more resilient portfolio.

Steven Brod

Steven Brod CEO and CIO of Crystal Capital Partners

Discretionary Macro vs Systematic Macro: Why Diversification is the Smartest Play