Cross-Sectional Global Macro: Portfolio Diversification for Turbulent Times
After more than a decade of global monetary expansion, many allocators are concerned that both bond and equity valuations look stretched. In this environment, a cross-sectional global macro approach can offer a form of diversification that traditional stocks and bonds cannot. In our view, alternative strategies that are uncorrelated with the major asset classes become more valuable precisely when those markets appear fully priced. In this recorded session, Versor’s founding partners discuss the ideas behind the firm’s white paper, Portfolio Diversification for Turbulent Times, authored by Deepak Gurnani and Ludger Hentschel. They explain why cross-sectional positioning differs from the trend following that dominates much of systematic macro, how return dispersion across markets creates opportunity, and why separating returns from market direction can strengthen a portfolio. The discussion is analytical rather than promotional, and it is intended to help allocators think clearly about where genuine diversification may come from.
What We Cover
- Why stretched equity and bond valuations raise the value of uncorrelated, market-neutral strategies.
- How a cross-sectional approach positions long and short within each asset class to stay market neutral.
- Why much of what is labelled systematic global macro is actually driven by trend following.
- How return dispersion across regions and markets creates the opportunity set for cross-sectional strategies.
- How disciplined portfolio construction screens out positioning that tends to fail in stress periods.
Key Takeaways
- Uncorrelated returns make diversification durable. A strictly market-neutral, cross-sectional approach can produce returns that are largely uncorrelated with equities and bonds. That independence is what makes the diversification benefit hold up over time.
- Dispersion is the opportunity set. Cross-sectional strategies draw their opportunities from return dispersion across markets. Dispersion tends to widen when monetary and fiscal policy paths diverge across regions.
- Look beneath the global macro label. Much of what is labelled systematic global macro is dominated by trend following. Allocators seeking genuine diversification should distinguish directional approaches from cross-sectional ones.
- Signals should fit each asset class. Forecasting signals tuned to the behaviour of each asset class can be more effective than a single set of signals applied uniformly. Commodities need not behave like fixed income, so the same signals need not apply.
- Resilience is built in construction. Deliberately excluding positioning that is fragile in stress periods, such as short-volatility or emerging-over-developed tilts, supports resilience when diversification is needed most.
The Presenters
Deepak Gurnani, Founder and Chief Investment Officer
Deepak Gurnani is the Founder and Chief Investment Officer of Versor Investments. Deepak has three decades of experience in applying quantitative methods to uncover alpha across global equity markets. Over the past decade, he has focused on pioneering the use of AI and alternative data in equity investing.
DeWayne Louis, Founding Partner, Capital Formation
DeWayne Louis joined Versor Investments as a Founding Partner and is based in New York. DeWayne has over 20 years of experience in quantitative investment strategies, investment banking, private equity and hedge funds.
Ludger Hentschel, Founding Partner, Investment Advisor
Ludger Hentschel joined Versor Investments as a Founding Partner and is based in New York. Ludger has over 20 years of experience in quantitative research and investing.
Disclaimer: Past performance is not necessarily indicative of future results. Participation in this webinar is limited to Qualified Eligible Participants (QEPs) as defined under applicable regulations. For informational purposes only. Not an offer to sell or a solicitation of any type with respect to any securities or financial products. This webinar was conducted in collaboration with Middlemark Partners.
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