Fourth Quarter, 2011: Global Perspectives on 2011 and 2012

As we enter 2012, many of the overriding macro issues are still prevalent on the minds of investors. These are the same issues that made investing and trading capital markets in 2011 very difficult. They are as follows:

1. U.S. debt and deleveraging
2. Eurozone crisis
3. China economic slowdown
4. Japanese fiscal situation

1. Too Much Debt...Still!
The global debt problem resides at both the government and the individual (consumer) level. It is arguable that little progress was made in 2011 when one looks at the Western world.

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Outlook for 2012
We believe 2012 will be a good year for our funds. While we expect some high-stress periods (although shorter than 2011), and there should be lower overall market volatility. Dispersion should also increase this year, meaning that correlation should be lower between stocks and asset classes, making it a more favorable environment for long/short strategies. With lower volatility and coming off a difficult year for most assets classes (other than investment grade bonds), this should be a better year for most strategies. If any red lights start flashing, we are prepared to swiftly hit the brakes.