Economy & Capital Markets:
On December 15th the Fed indicated that: Treasury and mortgage bond purchases are to end in mid-March 2022, and its benchmark interest rate will rise to 0.9% by the end of 2022 and then onto 1.6% by the end of 2023. Both the stock market and treasury yields maintained their range. Unnecessary promised massive fiscal expansion, due to both high inflation and low unemployment, stalled in the Senate.
Governing bodies have panicked over a virus that has a high transmission but low and known mortality victim profile, causing increased inequality. Governments have relied on an unskilled general population to provide specialist medical procedures on themselves, instead of providing specialist procedures by the medical profession to high mortality profiles. Without restrictions the virus would have had minimal effect on both the economy and social structures. Economies and capital markets therefore remain enthralled by government medical policy.
Also on December 15th the PBC cut the required reserve ratio for financial institutions to an average 8.4% to support supply-side structural reform, at the same time it increase the foreign exchange reserve requirement to 9%. The PBC expects the RMB exchange rate to remain stable, to utilise a further RMB300 bn central bank lending for micro and small business and, to further bing down actual loan rates.
The ECB expects in 2022: 4.2% GDP growth, a 7.3% unemployment rate and 3.2% inflation rate. 3mth EIBOR is not expected to return to zero (from -0.5%) until 2024. Pandemic net asset purchases are expected to continue through 2024. Non-pandemic net asset purchases are expected to continue at EUR 20 bn per month from October 2022. The 3rd target longer-term refinancing operations are expected to end in June 2022.
Kings’ Portfolio (Global Mega Cap Long/Short Equity Investing):
In Q4 the portfolio gained 0.70%. For the year the portfolio gained 7.96% after reaching a return high of 13.77% in June. Since inception the Sharp (risk adjusted return) is 1.02, matching the world equity index and S&P500. Winning positions for the year included: long positions Nippon Yusen KK (Japanese industrials) contributing 2.6%, JPY 1.62%, Danieli (Italian industrials) 1.48% and, short positions Canopy Growth (Canadian healthcare) 2.27% and Ping An Healthcare (Chinese consumer non-cycl) 2.01%. Losing long positions included: GBP 1.30%, Tokai Carbon -1.40%, Ube Industries (both Japanese basic materials companies) -1.10% and, Clinuvel Pharmaceuticals (Australian healthcare) -1.08%
Belsize Strategy (Macro & Global Futures Trading):
In May, with the advancement of the firms AI abilities, this long-standing strategy which provided excellent returns during the 2007/8 financial crisis restarted. Following calibration of the Artificial Intelligence calibration, in the final third of the year the strategy eked out a profit, although adversely effected by blanket economically/socially restrictions for a novel illness that effects a very focused group.
Private Equity Strategy (Illiquid Investments):
In 2021 Q2 the firm added five position (including reservations) to its first venture capital investment in 2019. Sector breakdown now stands at: 29% media & entertainment, 22% communications, 18% real estate, 18% finance and, 8% food and beverage. The technology breakdown in the portfolio consists of 60% apps, 20% hardware, 10% sharing economy and 10% e-commerce. The firm makes no positive discrimination except for the combination of good ideas and teams, however the initial investment was to a female managed business and, we have further invested in one black and two Latin managed businesses.
Crypto Currency Strategy (Inter-day Trading):
Due to the rapid development of the firm’s proprietary AI, in June a crypto trading strategy was initiated, across 11 currencies each with a market capitalisation over $1Bn. In the first eight months of the strategy, low double-digit returns were recorded.
Artificial Intelligence & Technology Development:
Early in Q1 2021 the firm completed its software development target for the year. Apart from further improved accuracy of decision making, a surprising offshoot was increased speed. This has allowed far greater diversification across instruments and time horizons. The firm now looks to improve its human language analysis to identify political impacts on capital markets. The firm also looks to develop consultancy and possibly software offerings.
Firm Operational Update:
Since 2015 the firm has been maintained as a Californian Registered Investment Advisor (RIA) within FINRA and SEC USA government oversight. At present the firm’s administrative headquarters are in London, UK; if global travel restrictions return to pre-Covid levels we expect this to be more fluid.
The firm looks to develop infrastructure for the deployment of capital in impact investing over the next five years.