After the G7 meeting this weekend, the global equity markets felt heavy as $Yen traded below 110. US Treasury Secretary Jack Lew called for the Bank of Japan not to weaken their currency. The US stance seems to be, global growth will not come at the expense of a stronger dollar. In fact, not until the International Monetary Fund announced their restructuring of Greek debt, essentially freeing up capital, did the global equity markets begin to rally. It is clear, Europe is doing whatever it takes not to disband the European Union.
The recent US equity market strength reduces the risk for the Federal Reserve to tighten, and most likely they will this summer. We agree the Fed should tighten but disagree on how they should tighten. The challenge is the nonlinear impact on liquidity from raising short term interest rates when they are near-zero. The risk for the Federal Reserve of tightening short term interest rates is a flattening yield curve due to a weakening economy. In the 21st century, excess supply rather excess demand is the challenge for the central banks. Consequently, the Federal Reserve has the unique opportunity to sell its bond holdings at historic highs while reducing its balance sheet and keeping the yield curve steep to support the banking industry. The founding principle of the Federal Reserve Act of 1913 was to establish a government bank with the ability to issue newly created funds to bail out the private banking system when called upon. In sum, not until the Fed reduces its $4 trillion balance sheet can it infact provide unlimited capital in a time of crisis.
Tuesday, May 24th on the close we covered our short in the S&P at equivalent index price of 2076. Wednesday, May 25th, on the close we covered our short in the Japanese Nikkei at equivalent index price of 16,750. We are currently long US 10yr notes and 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 +72.68% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is +22.02% 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.