The low inflation and low interest rate environment that we experienced in the last 20 years was only possible as inflation was exported away to low cost producer countries. This is equivalent to offshoring production capacity. It must therefore lead to a trade deficit, if it is successful. We know on hindsight that it has [...]

What are investors worried about? There is a lot to worry about but there are usually two to three factors that really drive sentiment. The G20 summit has brought the relationship between China and the US into the spotlight. The concerns extended beyond currency wars and trade protectionism to strategic and geopolitical issues. The inflation [...]

Inflation and the internal purchasing power of money:   On the surface there appears to be no inflation in the US. 1.1% YOY inflation is neither too high nor too low. However, given the state of growth in the economy, central bank policy, fiscal strength or lack thereof, the risk of deflation has become a [...]

As the US increasingly moves closer to becoming a net exporter, by intent and also since the PBoC and BoJ are reducing vendor financing in the form of purchasing US treasuries, the US current account may move into surplus against China and Japan. This would mean a shortage of USD to recycle which would mean [...]

Last week end I was walking down Bond Street when I came to the Hermes shop. Nice clothes, nice bags, nice scarves, nice long queues at the till, and with a clientele that isn’t as predominantly Asian as LVMH. I’m not sure I would buy the clothes, JP Gaultier has just quit womenswear, the menswear [...]

Background: In 2008, as investors fled in panic, and we ourselves had to raise cash on behalf of investors, we thought to ourselves: how would we manage our own money? Partner’s money. Assuming that everyone was thinking straight. The result of this experiment has been a model portfolio of hedge funds which we have tracked [...]

Hedge Fund Performance Aug 2010 Hedge Funds as a group have done poorly in 2010, yet they continue to outperform equities by a significant margin both in absolute terms as well as on a volatility adjusted basis.  Even so, why would an investor pay hedge fund management and performance fees for a paltry 1.65% YTD, [...]

UCITS Directive 1985: To harmonize the sale and marketing of ICS to retail investors. To create a single market and to impose a common set of investment parameters, restrictions and supervision. Ultimately failed its objectives. Failed to envisage the growth of complexity of CIS potentially structured within UCITS   UCITS II: Planned amendments and augmentations [...]

 The performance of funds of hedge funds has apparently underperformed that of direct investments in hedge funds even after correcting for fees. Why is this?  Performance Table April 2003 to July 2010. A comparison of FOF, HF and a sample FOF *HFRXGL is an investable hedge fund index, HFRIFWI is the HFRI hedge fund index, [...]

  At the beginning of 2010 equity markets had benefited from almost a year of positive returns. At the beginning of 2009 it was clear that it would be fairly easy to make money in the market given the degree of pessimism in the market at the end of 2008 and how much equity markets [...]