systematic vs discretionary macro

The evolution of discretionary versus systematic macro is a fascinating topic, especially for someone starting out in the industry today. Based on the most helpful WSO content, here are some insights and considerations:

1. Current Landscape: Systematic vs. Discretionary Macro

• Discretionary Macro: At major platforms like Brevan, BlueCrest, Citadel, Millennium, and BAM, discretionary macro remains dominant. Many PMs focus on relative value (RV) trades—swaps, bonds, STIRs, curves, cross-market RV, vol, basis—rather than outright directional macro calls. The edge often comes from identifying dislocations, structuring trades, managing carry/roll/convexity, and sizing risk effectively. While the product space is quantitative, the best traders still operate discretionarily.
• Systematic Macro: Systematic macro is growing but remains more niche compared to discretionary RV. Platforms are actively building out systematic capabilities, but challenges like capacity constraints, decay, and crowding can limit scalability. Systematic PMs often manage smaller books compared to top discretionary PMs, who can target significantly larger risk allocations and PnL numbers.

2. Scalability of Systematic Macro

• Discretionary macro PMs at top platforms can scale to very large books, with some targeting $100M+ in PnL. Systematic macro, while promising, faces inherent limitations in scaling due to market capacity and the risk of strategy decay. This makes it harder for systematic PMs to achieve the same scale as top discretionary macro PMs.

3. Long-Term Career Path

• Quantitative Discretionary Macro/RV Trader: This path involves using signals and models as inputs while maintaining a discretionary approach. It allows for flexibility and adaptability, which are critical in macro trading.
• Systematic Macro PM: While systematic strategies are growing, the industry still values discretionary skills highly. A purely systematic approach may limit opportunities in certain environments where discretion and judgment are key.
• Quantamental PM: Combining systematic and discretionary skills (quantamental) is increasingly seen as the ideal path. This hybrid approach leverages quantitative tools for idea generation and risk management while retaining the ability to make discretionary decisions.

4. Positioning Yourself for Success

• Build a Strong Foundation in Macro: Develop a deep understanding of macroeconomics, central banking, and monetary policy. Books like "Macroeconomics for Professionals" and "Central Banking 101" are excellent starting points.
• Focus on Product Depth: Gain expertise in rates, vol, and RV products. Understanding the nuances of these markets is crucial for both discretionary and systematic roles.
• Develop Quantitative Skills: Programming (Python, R, Matlab) and data analysis are essential for systematic research and for enhancing discretionary trading strategies.
• Networking and Mentorship: Connect with PMs and sell-side desk heads, share trade ideas, and seek feedback. Networking is critical for breaking into top macro funds.

5. Path to Becoming a Quantamental PM

• Start by focusing on product depth and discretionary trading skills. Build a strong foundation in macro and RV products.
• Gradually incorporate systematic research skills, such as developing models and signals, to enhance your discretionary approach.
• Alternatively, if you start in a systematic role, work on developing a deeper understanding of macro fundamentals and discretionary decision-making over time.

Final Thoughts

The industry is not moving away from discretionary trading entirely, but the integration of quantitative tools is becoming increasingly important. A hybrid quantamental approach offers the best of both worlds and positions you well for long-term success.

Sources: https://www.wallstreetoasis.com/forum/hedge-fund/developing-macro-understanding?customgpt=1, Q&A: Head of Macro Strategy at Hedge Fund Taking Questions, Trader + Career Advice = Next Job, Q&A: First year macro hedge fund analyst