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CFA Level I Exam · Hedge Funds

Macro and Managed Futures Hedge Fund Strategies

Updated 7 October 2026 · Fact-checked

Global macro funds take directional positions across asset classes based on views about economic and policy events, often with discretion. Managed futures funds (CTAs) trade futures, mostly using rules-based trend following. To answer exam questions, match the driver: economic view means macro, price trend and futures means managed futures.

Understand Macro and Managed Futures Strategies

Both strategies are directional. They do not try to remove market risk. They take positions on where prices will go, and they can go long or short in many markets.

Global macro funds form views on economic trends, interest rates, currencies, inflation and policy. They trade equities, bonds, currencies and commodities, often through derivatives and with leverage. Many are discretionary: a manager decides using judgment. Some are systematic, using models. Returns depend on being right about big themes, such as a central bank changing rates or a currency regime breaking.

Managed futures funds are run by commodity trading advisors (CTAs). They trade futures and forwards on commodities, currencies, interest rates and equity indexes. Most use trend following: buy markets that are rising, sell short markets that are falling, using rules and signals. Some are discretionary, but the common exam picture is systematic.

The key difference is the source of the decision. Macro is driven by fundamental economic views and is often discretionary. Managed futures is driven by price patterns and is often rules-based. Macro has a wider instrument set. Managed futures sticks mainly to liquid futures markets, so it is usually more liquid.

Trend followers tend to do well in sustained moves and poorly in choppy, range-bound markets that reverse often. They can perform well in prolonged market stress that develops into trends, which is why investors value them for diversification. This is not guaranteed. Both styles use leverage, so losses can be large when views are wrong.

Multi-strategy funds combine several hedge fund strategies (such as equity, event-driven, relative value and macro) in one fund, with capital shifted among them. This diversifies strategy risk but adds layers of management and cost.

How to solve Macro and Managed Futures Strategies questions

Use this method for any question that describes a fund and asks you to name or judge its strategy.

  1. 1Find the decision driver in the stem: an economic or policy view, or a price trend or signal.
  2. 2Note the instruments: broad asset classes including currencies and bonds, or mainly futures.
  3. 3Check the style: discretionary judgment or rules-based system.
  4. 4Match the label: economic view and discretion points to global macro; trend signals and futures points to managed futures (CTA); several strategies in one fund points to multi-strategy.
  5. 5Check the market condition if asked about performance: trends help trend followers, choppy reversals hurt them.
  6. 6Eliminate the two options that describe equity long/short, event-driven or relative value traits, such as merger arbitrage or convergence trades.

Quickest way: Driver-and-instrument shortcut

When to use it: Use when the clock is tight and the stem clearly describes a fund's approach.

  1. Spot the trigger words: 'economic view', 'central bank', 'currency' mean macro; 'trend', 'signals', 'futures', 'CTA' mean managed futures.
  2. Cross out options about security-specific analysis or arbitrage spreads.
  3. If two options remain, pick the one that matches the performance condition (trending markets for CTAs).

Common mistakes in Macro and Managed Futures Strategies

  • Calling managed futures funds market neutral.

    Hedge funds are often assumed to hedge away market risk.

    Fix: Remember both macro and CTAs are directional. They take net long or short positions and can lose heavily.

  • Saying all macro funds are systematic.

    Students link macro with models and data.

    Fix: Macro is commonly discretionary and based on views. Managed futures is the usual rules-based one.

  • Assuming trend followers profit in any volatile market.

    Volatility sounds like opportunity.

    Fix: They need sustained trends. Frequent reversals create repeated small losses.

  • Limiting managed futures to commodities.

    The word 'commodity' appears in CTA.

    Fix: CTAs trade futures on currencies, rates and equity indexes too.

  • Treating multi-strategy as a fund of funds.

    Both hold several strategies.

    Fix: A multi-strategy fund is one fund run by one manager allocating among strategies internally, not an investor in other funds.

Worked examples

Example 1

A fund manager believes a central bank will cut rates sharply and that its currency will weaken. The fund buys government bonds, sells the currency forward and buys equity index futures of a trading partner. Which strategy is this most likely? A. Merger arbitrage B. Global macro C. Convertible arbitrage

Show the solution
  1. Driver: a view on central bank policy and currency, which is an economic view.
  2. Instruments: bonds, currency and equity index futures across asset classes.
  3. Style: discretionary directional positions based on a theme.
  4. Merger arbitrage and convertible arbitrage depend on security-specific situations or pricing relationships, so A and C are eliminated.

Answer: B. Global macro.

Example 2

A CTA uses price signals to buy futures that have risen and short futures that have fallen. In which environment is it most likely to perform worst? A. A strongly trending market that moves in the same direction for months B. A choppy, range-bound market that reverses often C. A steady decline in prices across many futures markets that continues for months

Show the solution
  1. Trend following earns money by staying with a move.
  2. In a market that trends in one direction for months (A), the signals keep the fund positioned with the move, so it captures gains.
  3. In a steady, continuing decline (C), the fund can short the falling markets and ride the downtrend, so this is also a favourable environment.
  4. In a choppy, range-bound market (B), signals flip as prices reverse, causing repeated small losses, so this is the environment where it is most likely to perform worst.

Answer: B. A choppy, range-bound market that reverses often.

Exam tips

  • Look for the driver word first: view versus trend. It decides most questions.
  • Remember managed futures is usually more liquid because it uses exchange-traded futures.
  • Expect questions linking trend following to performance in trending versus range-bound markets.
  • For multi-strategy, think diversification across strategies within one fund, with extra cost and complexity.

Practice questions from Hedge Funds

Macro and Managed Futures Strategies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Macro and Managed Futures Strategies: frequently asked questions

What is the difference between global macro and managed futures funds?

Global macro funds trade many asset classes on views about economic and policy events, often with discretion. Managed futures funds trade mainly futures, usually following price trends with rules. The first is view-driven, the second is signal-driven.

What does CTA stand for?

CTA stands for commodity trading advisor. It is the manager of a managed futures fund. Despite the name, CTAs trade futures on currencies, interest rates and equity indexes as well as commodities.

When do trend-following CTAs struggle?

They struggle in choppy, range-bound markets where prices reverse often. Signals trigger trades that then lose money. They do better when markets move strongly in one direction.

What is a multi-strategy hedge fund?

It is a single fund that combines several strategies, such as equity, event-driven, relative value and macro. The manager shifts capital among them. This spreads strategy risk but adds cost and complexity.