Global growth will come from US growth and US growth will come from fair trade policies and infrastructure growth. To help export nations remove their tariffs on US products, the US$ will strengthen. In the short run, a strengthening US$ will help export nations generate growth and in the long run help them open their markets to US products. To facilitate infrastructure growth interest rates need to be at their natural equilibrium rather than artificially affected by central banks. For the first time in modern history, the supply of excess bank reserves globally is greater than demand. Without central bank interference, the Natural Equilibrium of Interest Rates would be 0% - not negative as with the Bank of Japan and European Central Bank and not positive as with the Fed paying interest on excess bank reserves.
Our fear is the central banks do not appreciate the Natural Equilibrium of Interest Rates nor appreciate the deflationary Impact of Monetary Policy either positive or negative off of 0%. We believe the BOJ and ECB are using negative interest rates to lessen the burden of sovereign debt. We also believe the Fed is looking for political cover and will tighten in the name of normalization. A Fed tightening in December will artificially raise fed funds further by paying interest on the excess bank reserves by using the interest on their $4 trillion balance sheet. The December tightening will be in stark contrast to a US and global economy trying to use debt to pay for infrastructure growth. What the Fed has not yet articulated, is the supply of excess bank reserves represents a lack of demand for capital which is deflationary and not until demand is greater than supply will inflation be a concern again.
On Tuesday morning, November 15th we sold our our long in the US 10yr note for a loss at an equivalent yield of 2.22% - yields move in opposite direction of price. We replaced this hedge by selling the $Yen at 108.80 to create a synthetic option bias neutral. Currently we are long the German Dax, short the Euro$ and in a synthetic option on the $Yen.
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 +46.20% 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.