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How To Prepare Yourself for a Trading Career at a Global Macro Hedge Fund?

Recently at LHG, we have seen an increasing number of candidates applying for the trader role of our flagship Diversified Global Macro Strategy.

In this article, we will explore some of the key qualities you need to possess in order to be considered the ideal trader by LHG's HR department or potentially other global macro hedge funds as well.

Traits global macro hedge fund employers look for in a trader

Most macro hedge fund employers and allocators pay more attention to a potential candidate's or fund manager's real-life experience than their degree.

Generally, the most important traits include:

1. Excellent risk management skills

First and foremost, no hedge fund manager wants to report to his/her investors and partners that they have lost any significant capital.

This is especially true for global macro hedge fund managers. If you look at the list of the biggest trading losses in history, most of the multi-billion-dollar losses came from trading financial instruments and asset classes frequently used by global macro funds (i.e. Foreign Exchange, Stock Index Futures, Commodity Futures and other derivatives). Therefore, macro strategies are by nature riskier than most other strategies (without a comprehensive risk management strategy in place, of course).

Hence, we would strongly advise that when applying for a trader role at a global macro shop, do NOT start your application or interview talking about potential returns. Instead, talk about your approach to risk management first.

2. Proper trading psychology

We will start this point with a quote from Colin Lancaster, former Head of Macro Strategies at Citadel, who wrote in his book: global macro trading is not for the faint-hearted.

In the world of global macro trading, where billions, or sometimes even trillions, of dollars change hands every trading day, traders without a healthy and sustainable trading psychology are less likely to succeed.

To better understand this point, let's look at the contract values of some of the instruments frequently traded by global macro funds:

  • E-Mini S&P 500 Futures (known as the ES for short): the ES is one of the most universally-traded financial instruments by global macro funds around the world. On Sep 21, 2021, the S&P 500 index closed at 4354. With the contract size of the ES being $50 x S&P 500 Index, the notional value of a single contract is $218K. Depending on the accompanying risk management strategy, LHG's Global Macro Fund can easily trade 500+ ES contracts for a single-fill ticket/order.

  • The interbank foreign exchange market, or spot forex, is another extremely popular market traded by global macro hedge funds. A standard lot is the equivalent of 100,000 units of the base currency in an FX trade. Because the FX market is less volatile than the equity market, LHG's Global Macro Fund trades somewhere between 1000-3000 standard lots ($100-300 million in notional value) in a single fill.

That's why, when you look at LHG's careers website, one of the core requirements we have for our trader candidates is "have traded account(s) with at least USD 5,000,000 or equivalent in initial deposit(s) for at least 1 year."

3. Portfolio diversification skills

Historically, most people in global macro funds started out as rates or FX traders in investment banks. They’re not usually equity experts. Equity traders are always bullish, always optimistic on the world. But not macro. Global macro traders are inherently more skeptical, more pessimistic.

One of the core attributes global macro employers like LHG look for, is the trader's ability to flip between being a bull and a bear, and correspondingly take long and short positions. We also look for traders who can optimally diversify across asset classes - from equity to FX to commodities, not just the equity market.

4. Add value, add value and add value

Like LHG, in order to attract investors in the first place, most global macro hedge funds already have their own in-house trading strategy that produces excellent risk-adjusted returns.

However, nowadays, many hedge funds are training talent in-house, like Point72 and its Academy. On the other hand, Citadel is said to have "an army of headhunters whose singular job is to know, to the penny, how much each bank trader is hauling in at any given time," and to poach them if necessary.

Therefore, traders with their own profitable trading system who can also demonstrate that the system has incorporated the basic principles of 1-3 mentioned above, are likely to be welcomed at most global macro hedge funds.

Interested in becoming a global macro trader at LHG?

If after reading this article, you believe you are qualified to become a trader for our global macro strategy, please check out our careers site and share your resume with our HR department.

Copyright© (updated 2022) LHG Capital Management. All Rights Reserved.


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