What is 'Macro-Hedge'

An investment technique used to eliminate the risk of a portfolio of assets. In most cases, this would mean taking a position that offsets the whole portfolio. But this technique is difficult in practice because there is rarely one asset that will offset the risk of a broader portfolio, so applying a macro-hedge most likely requires taking an offsetting position in each individual asset.

Explaining 'Macro-Hedge'

Here's an example of a macro-hedge: an index-fund manager believes there will be a loss in the index in the upcoming period. To eliminate the risk of a downward turn in the index, the manager can take a short position in the index fund's futures market that will lock in a price for the index.

Further Reading

Hedge fund and commodity fund investments in bull and bear markets
jpm.pm-research.com [PDF]
… in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro- economic and financial fundamentals, but the …

Estimating hedge fund leverage
papers.ssrn.com [PDF]
… in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro- economic and financial fundamentals, but the …

The law and economics of hedge funds: Financial innovation and investor protection
heinonline.org [PDF]
… in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro- economic and financial fundamentals, but the …

Measuring the market impact of hedge funds
www.sciencedirect.com [PDF]
… in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro- economic and financial fundamentals, but the …

The trouble with hedge funds
onlinelibrary.wiley.com [PDF]
… in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro- economic and financial fundamentals, but the …