Macro Strategy: At a glance

Our global macro team has been created by the desire to come up with a portfolio that will be indifferent to market shifts in discounted economic conditions.

The principles behind our investing strategy relate to answering the question “What kind of portfolio should we hold to capture all the possible economic shifts and perform well across all environments? How can we preserve capital and generate adequate returns during changing economic conditions, with market developments building on negative interest rates trends, and high regulatory pressures?”

Intellectually speaking, we can explain many things in financial markets by breaking down economies, industries and sectors into their basic component pieces and study their relationships over time.Based on our experience, we do believe that changes in growth and inflation are the biggest drivers of asset prices, since markets move based on shifts in “value” conditions relative to the “market” conditions, which are priced in.We also believe that all asset classes have environmental biases. For example, stocks will perform best during periods of growth, bonds will perform best during times of disinflationary recessions and cash will be more attractive when money is tight.

Therefore, crafting an investment strategy that captures all these scenarios is the way to go. Our strategy relies on the notion that the majority of asset classes react in understandable ways based on the relationship of their cash flows within their economic environment.Hence, in the current volatile market, we are convinced that our method to balance assets based on these structural characteristics will provide better returns at lower risk. It is reasonable to hold a mix of assets that can perform well across all different types of economic environments.

It’s true that we are sailing in uncharted waters, into market environments unfamiliar to us, with unconventional policies by governments around the world and monetary experiments by major central banks that may lead to further economic shocks, ranging from stock market crashes to banking crises and emerging market blow-ups.

Market participants as well as private and institutional investors might be surprised by future inflation shifts and growth.For all these reasons, our macro team follows a conceptual framework- that could chug along these shifts by providing attractive and relatively stable returns in order to reach our clients’ long-term financial goals.At the heart of our investment philosophy is the very strong belief that rigorous top-down research has the potential  to outperform the markets on a consistent basis. Our strategy offers the right balance, prudence and diversification.

In brief, we are discounting all possible future conditions, with equal odds of being right. The model can be decomposed to two key drivers and four alternative cases.

Our main strategy is hedged to four different strategies (intended to offset potential losses), each of which does exceptionally well in a particular environment. The overall value of our investment is primarily determined by the volume of economic activity (GDP growth) and its pricing (inflation). When shifts happen to the market due to changes in one or both of those two factors, the model ends up putting a portfolio in one of these sectors.