We started the year with no position. 2016 began with policy makers and sovereign nations making moves that have proven to be destabilizing and counterproductive. As we wrote in our End of the Year email,
On January 6th, we tried to buy the German Dax because it had the support of the ECB. On January 10th our proprietary approach had us buy the S&P.
On January 14th, we were stopped out of our German Dax and bought DJI and Japanese Nikkei.
On January 19th, we were stopped out of our equity positions.
On January 21st, we bought the German Dax with anticipation of European Central Bank President Mario Draghi saying something dovish to reverse the market sell-off.
After we were stopped out of equity positions we went back to the drawing board to determine what went wrong. After further analysis we determined our proprietary approach was correct to signal a buy on equities, however, it did not take into account the massive deleveraging that occurred due to the Fed tightening. This cause us to write the white paper, “Near-Zero Monetary Policy” to better understand what was affecting the markets. What we discovered was the impact of monetary policy is nonlinear and most impactful Near-Zero. The graph of the equation, basis point move divided by interest rates (bp / ir) say it all. Full disclosure, we sent a copy of the graph pasted on the outside of an Express Mail letter to Chairwoman Janet Yellen for Monday delivery in hopes she to would see the graph before the January FOMC meeting. Interestingly, if the Fed does realize the impact of monetary policy is nonlinear then their tightening was meant to be deflationary. A deflationary move would cause US treasuries to rally to historic levels enabling the Fed to sell off its bonds to reduce its $4 trillion balance sheet.
We are currently long the German Dax and 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 -5.57% with a Graduated 10% Hurdle Rate
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.