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Alternative Market Briefing

This contrarian macro hedge fund is ready for a massive price correction

Wednesday, May 18, 2022

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Neal Berger
B. G., Opalesque Geneva:

If you believe there is going to be a massive price correction and that now is the time for investors to have a hedge to beta exposure, then this contrarian macro fund is well positioned for you.

Eagle's View's Contrarian Macro Fund Ltd seeks to capitalise on the manager's view that asset prices have just begun a multi-year process of re-rating downward, due to global central bank regime change toward a more restrictive liquidity environment. The core strategy actively sells short securities that the CIO believes have been heavily influenced and distorted by global central bank monetary policy.

Contrarian investing is an investment style that goes against prevailing market trends, selling when others buy and buying when mainstream investors are selling.

The Eagle's view

Major central banks have pumped over $25tln into the global economy since 2008, with over $9tln in response to Covid-19 alone. Now they face the difficult balancing act of pulling back massive asset purchases without disrupting growth.

Founder and CIO Neal Berger believes this 'grand experiment' is not without collateral effects. The initial effect has been material asset price inflation. Now we are starting to see consumer price inflation which is currently running at 7.5% per annum. This has caused major central banks to engage in a 180-degree regime change in terms of both halting quantitative easing and initiating interest rate hikes in the US for the first time in 16 years. Some banks have started raising interest rates. Berger believes there will be an inevitable, sustained, and material negative impact upon certain security prices for the foreseeable future as this abrupt monetary adjustment starts to take hold.

Neal Berger is a hedge fund veteran with more than 30 years of experience on Wall Street. Prior to founding Eagle's View in New York City in 2005, he was the founder of the multi-strategy funds Apogee Fund and New Edge, collectively managing more than $150m. He was also a global macro trader at Millennium Partners.

He will present at our popular Small Managers - BIG ALPHA Episode 8 webinar on June 8th.

Tail hedge funds and short-sellers have largely failed to provide the protection they are supposed to provide to investors, he says; the former experience persistent theta decay of deep out of the money options during stable and upward periods, and the latter are subject to losses during times of countertrends rallies. Furthermore, the hedge fund industry is crowded and unless one can add a distinct value, the marketplace has no need for another "me too" product.

The macro fund

The fund is designed to provide a hedge to beta exposure and to provide standalone alpha for investors who share the manager's outlook. There is a need for an effective hedge as investors have become overly reliant on upward price moves of risk assets, and there has been no viable investment alternative over the past decade other than risk assets, Berger says. "An overwhelming majority of investors are simply at the whim of markets that, we believe, are about to experience a massive price correction as central banks cease quantitative easing and head toward more restrictive monetary policy."

The Cayman Master fund was launched in April 2021 with proprietary capital. The Feeder funds (Cayman and Delaware) were launched on March 1st, 2022. The strategy was flat the first year, and it is up 87% (net) YTD to April 2022.

"We are very pleased with our performance both YTD 2022 as well as since the inception of the Fund in April 2021," Berger tells Opalesque. "Last year was a strong year for overall markets, and our Fund achieved its goal of preserving capital during the rallying markets.

"During 2022 we have thus far been able to capitalize in a material way upon the decline in both equity and bond markets as interest rates have risen and equity markets have fallen in tandem. The trend is clearly in favour of a continuation of these moves as central banks around the world embark upon extraction of liquidity from the system in an effort to combat rising inflation. Price action in markets has allowed for substantial opportunities to capitalize upon material and persistent repricing of risk assets. We believe this trend will continue for the foreseeable future measured in years rather than weeks or months."

The core strategy of the fund uses asymmetric hedging strategies to provide a source of alpha during bullish periods. Examples include SPACS, equity markets activities (IPOs, secondaries, blocks), deep-value investing, and non-correlated strategies such as base metals trading, and quantitative strategies. These strategies are expected to be asymmetric, that is, to perform well during bullish environments and avoid material losses during bearish markets.


Upcoming webinar:

Small Managers - BIG ALPHA

Episode 8 of this groundbreaking webinar series presents another carefully screened panel of investment managers. In one hour, you'll meet them all, get to know their top quartile strategies and since this is an interactive session, you will be able to ask your questions.

Who:
• Craig Reeves, Prestige Funds
• Roy Niederhoffer, RG Niederhoffer Capital Management
• Neal Berger, Eagle's View Asset Management
• Rajat Suri, Helm Investment Partners

When: Wednesday, June 8th at 11am ET / 4pm UK time / 5pm CET

Free registration: www.opalesque.com/webinar/


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