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Neal Berger Matthias Knab, Opalesque: Neal Berger's Contrarian Macro Fund returned approximately 163% net in 2022, putting the fund in the upper hedge fund league globally. However, this triple-digit net return wasn't an overnight success but the result of a specific investment philosophy paired with skilled execution.
In early 2021, Neal Berger, a Wall Street veteran with decades of global macro trading experience at prestigious firms including Millennium Partners, Chase Bank and Fuji Bank, saw the opportunity set for a "contrarian macro fund" to take advantage of his belief that asset prices have begun a multi-year process of re-rating downward due to a regime change by central banks toward a more restrictive liquidity environment.
Indeed, central bank policy has now shifted 180 degrees in response to the threat of consumer price inflation which is currently running at over 7% in the US. The Euro area annual inflation was 10.1 % in November 2022. Berger believes there is an inevitable, sustained and material negative impact upon certain security prices for the foreseeable horizon as this abrupt monetary policy adjustment continues. His Contrarian Macro Fund is therefore designed to provide a unique and effective hedge to beta exposure, or, to provide standalone alpha for those investors who share Berger's macro outlook.
Berger launched the strategy live in April 2021. The core strategy, or "center book", of the fund is actively selling short securities that he believes have been heavily influenced and distorted by global central bank monetary policy - the unprecedented injection of trillions of dollars into the financial system.
Performance for 2021 was modestly positive at +0.21% however, this is seen in the context of the fact that the markets hadn't pivoted as of yet. Bergers' play started to unfold in 2022 when the strategy clocked in over 40% net returns for January. The year ended as it started, with December 2022 being another strong month with a 42.55% net return, bringing the YTD 2022 performance (estimated composite return across the fund's investor base) at +163.28% net of all fees and expenses.
In an investor communication obtained by Opalesque, Berger explained that, "December was a banner month for the Fund as we fully capitalized upon the breaking of the vicious countertrend short squeeze that had persisted in both stocks and bonds since mid-October. We bet big because the opportunity set was big. Our recent monthly performance swings have been large however, I do not anticipate that this will always be the case. When we perceive the opportunity set to be exceedingly fertile, we will seek to capitalize upon that commensurately. Conversely, the opportunity set will not always as great as it was during December and future gains/losses on a monthly basis may reflect that. We are very pleased and grateful that we ended 2022 very near our performance highs."
Outlook
"At this time, I foresee a similar opportunity set materializing for 2023 and we will act accordingly. Investors continue to fail to recognize that we are in the midst of a major bear market within all asset prices due to changed central bank posture toward liquidity. I sense that investors are increasingly less willing to "sell the market in the hole" and as a result, future short covering rallies may not be as aggressive as it they have been during 2022. This may allow for future short squeezes to be less frequent and less severe, although, we need to remain vigilant and manage risk appropriately in that context."
Neal Berger founded Eagle's View Asset Management (EV) in 2005. EV also manages top performing funds of hedge funds, providing investors access to a range of hedge fund strategies and markets that are often overlooked by most traditional and hedge fund investment vehicles. In these multi manager portfolios, Eagle's View invests in niche-oriented strategies and managers who show little or no correlation to mainstream asset classes such as equities, fixed income or commodities markets.
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