Benefits of LHG's global macro strategy
Our global macro strategy holds investments around the globe (over 15 different countries), as well as across six different asset classes.
Example portfolio: in late 2022, we were long silver, long EUR/CAD, short natural gas, short U.S. treasury ETF, and long the Hang Seng Index futures.
The portfolio was diverse, spanning across FX, commodity, equity and bond markets in the United States, Eurozone, Canada and Hong Kong.
Why go global?
LHG's opportunistic investment approach efficiently allocates investors' capital to the most trending or best-performing markets.
Since the bottom of the 2008 bear market, the ASX 200 (Australia) only advanced 138%, while the DAX rallied 350%, compared to a 570% advance in the S&P 500 (as of June 2021).
2. Lower portfolio volatility than benchmark indices
With comprehensive risk management strategies in place, LHG is able to steadily increase fund net asset value (NAV), with minimum volatility and drawdowns.
Example: For the 1-year period between October 2019 and October 2020, LHG returned double-digits on its flagship fund with a maximum drawdown of only -6.14%, substantially less volatile than the 35% drawdown that occurred in the S&P 500 during the March 2020 COVID-19-induced crash.
3. Negligible correlation to traditional portfolios
LHG's global macro strategy exhibits negligible correlation to traditional long-only (stocks, bonds, private equity and real assets) and equity strategy (long/short, equity market-neutral, value-oriented, etc.) portfolios. We don’t just invest in stocks or stock indexes, but also currencies, commodities, bonds.
We believe 2021 and 2022 are going to be the best years to be invested in commodities, therefore, we will allocate a large portion of our portfolio into the commodities market, which can potentially offer much higher returns than traditional portfolios. (For example, natural gas might go up 20 or 30% in 2021, while the S&P 500 returns -5% for the year, a 35% outperformance.)
4. Profit from all market conditions
Unlike long-only portfolios, our global macro strategy takes both long and short positions in different markets based on macroeconomic views.
(However, short-selling is highly risky without proper risk management skills because, theoretically, the prices of the underlying assets can go infinitely higher and the upside risk is unlimited. A very recent example is the Gamestop (or GME) saga, when retail investors on Reddit decided to collectively inflate the share price of GME and squeeze out short-selling hedge funds. GME went from $18 to a high of $480 in a matter of days, causing some hedge funds to lose billions of dollars.)
For LHG, the brief bear markets of Q4 2018 and March 2020 were some of the most profitable periods for us. Even more importantly, the "Gamestop saga" is much less likely to happen to global macro strategies. We will explain why in the next point.
5. Ample liquidity = fairer market
Ample liquidity: our global macro strategy bases its portfolio holdings primarily on a national macroeconomic level. For example, instead of buying or selling a single stock like GME, we buy and sell the futures contracts of the S&P 500 index, which has a daily average volume of around 300+ billion dollars. (Good luck to anyone trying to manipulate that market.)
Meanwhile, the FX market is the largest financial market in the world – even larger than the stock market, with a daily volume of US$7.5 trillion in 2022, and approximately 1/3 of that trading volume (approx. $2.5T/day) was conducted through the interbank market.
Fairer market: these highly liquid, highly mature markets have significantly less volatility compared to small markets like single stocks. One entity or group is very unlikely to be able to single-handedly manipulate the market (unless you count central banks).
The highly-liquid nature of these markets also makes effective risk management possible for us macro fund managers.
6. Total alignment of interest
Our founder and partners are investors in the global macro strategy.
To sum it up, the key benefits of our flagship global macro strategy includes:
1. Offers true diversification to our investors' portfolios;
2. Has lower portfolio volatility than benchmark indices;
3. Has low correlation to the traditional stock and bond markets; 4. Profits from both rising and falling markets; 5. Invests in markets with ample liquidity, no one could manipulate the market;
6. Total alignment of interest - LHG founder and partners are significant investors in the strategy.
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