The tone of the Market has changed, as communication out of the Fed is no longer expectations of 4 tightenings but rather the Market has misinterpreted the Fed tightening in December. What James Bullard from the Fed would like us to believe, is the Market viewed the 25bp tightening as a tightening to 1.25%, essentially 4 tightenings all at once. The argument given is the Market expected mechanical Fed tightenings similiar 2004 to 2006, when the Fed raised rates at every meeting for 17 meetings. Our concern continues to be the Fed sees monetary policy as linear rather than nonlinear, meaning any tightening would have a greater impact than the Fed expects. Nevertheless, we expect the Fed to remain data dependent with a discerning eye on inflation and full employment.

This dovish tone puts the Fed more inline with global central banks that are aggressively fighting deflation. Since the impact of monetary policy is nonlinear, negative rates are deflationary for asset prices, which explains the poor performance of both the Japanese Nikkei and German Dax. However, the recent dovish tone out of the Fed should compensate for the deflationary pressures of negative interest rates. Consequently, we expect asset prices to strengthen and the US$ to weaken. We continue to be long $Yen because we expect the BOJ to seek a weak Yen to support their economy. The ECB dovish tone may accelerate going into the March meeting, as the ECB tries to support their markets, as the United Kingdom considers a referendum to leave the European Union. We continue to be short US 10yrs because expect the Fed to be more dovish, less deflationary and if asset prices strengthen with a dovish tone from the Fed, the ECB may not feel the need to defend their markets with further negative rates.

Thursday, February 25th on the close we bought back our S&P short at an equivalent index price of 1951, leaving us long the S&P from 1810. We continue to be in a synthetic option on the Japanese Nikkei with a bias to the short side, however, a close above 16,300 would cause us to unwind our synthetic option. We are long $Yen and short US 10yr notes and are 87% 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 +72.68% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is +8.10% 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.