We began 2016 with policy makers and sovereign nations making moves that have proven to be destabilizing and counterproductive. In oil, the tension between Saudi Arabia and Iran are driving prices down which benefits neither country and forces further destabilization in the region. In 2015, the only countries that increased exports were Ireland and Vietnam. China, once a huge exporting nation moved to increase domestic demand and created two bubbles in their economy, first the real estate market and then the stock market. As we enter 2016, it seems the Chinese are reverting back to their exporting playbook and are devaluing their currency to stimulate economic growth. The devaluation creates pressure in the Chinese capital markets to deleverage as capital seeks out assets not being devalued by currency devaluation.

As we wrote in our End of the Year email,

We continue to be concerned about divergent central banks and the underestimate by the markets and Fed on how constrictive a 25bp tightening is when rates have been at 0% for over seven years. The People’s Bank of China, the Bank of Japan and the European Central Bank need to be more authoritative with the markets as the Fed begins to tighten, otherwise the central banks run the risk of losing control. The central banks are challenged by the deleveraging caused by higher rates and need to keep the markets from selling assets to further accelerate the deleveraging….Since the central banks are divergent, the best opportunity for asset growth is in Europe as the ECB will continue quantitative easing until the sovereign countries reduce debt and stimulate their economies. Both the US and China and possibly Japan run the risk of deleveraging.

Moving forward into 2016, our trades will only risk 2% of Net Asset Value (“NAV”) as compared to 5% in 2015 to reduce volatility. Wednesday, January 6th we bought German Dax futures at an equivalent index price of 10,120. This is our only position and we are 25% invested.

In 2012 modeled performance (7 ˝ mo.) net of all fees was +12.46% with a 10% Hurdle rate
In 2013, modeled performance net of all fees was +19.73% with a 10% Hurdle rate
In 2014, modeled performance net of all fees was +56.42% with a 10% Hurdle rate
In 2015, modeled performance net of all fees is 72.02% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is -1.04% with a Graduated 10% Hurdle Rate

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Disclaimer:

The Unicorn Macro Fund, LP (“Fund”) operates under the SEC rules of 506(c) of Regulation D. This rule allows general solicitation as long as all purchasers of the Fund are accredited investors and the Fund takes reasonable steps to verify that purchasers are accredited investors. The 506(c) rule benefits funds that perform better than their peers, because for the first time, Regulation D funds can post their results publicly.

The Fund trades both long and short positions in a variety of global markets and its performance is not correlated to any one market. Performance of the model of the Fund is measured by Net Asset Value (NAV) which is net of all fees, is unaudited, and may include the use of estimates. Individual results will vary based on the timing of an investment and past performance is no guarantee of future results and there is a possibility of loss.

The modeled results are based only on capital appreciation from macro style trades. The results do not include dividend reinvestment or any other form of cash flow and are taxed as ordinary income. All trades have a risk/reward objective of at least 3 to 1 and each full position risks no more than 2% of assets. There will be times when market conditions may alter these objectives. Since the inception of the model our trading of the methodology has become more precise.