Portfolio designs should not be static, and need to be dynamically rebalanced with shifts in underlying macro-economic cycles. This rebalancing in accordance with shifting economic conditions is of paramount importance to generating superior investment performance for our clients. Artemis is uniquely qualified in this regard because of our extensive background in global markets, macro-economic analysis capabilities and unique client affiliations.
A typical economic cycle consists of four distinct quadrants largely segmented by two factor: the underlying growth rate of an economy and fiscal and monetary responses to that growth rate. A typical cycle moves clockwise through these quadrants.
Our macro-economic cycle-based process is outlined below (please click on each quadrant for details).
Cycles typically begin in Quadrant I, where the economic activity is weak and monetary policy is accommodative. Optimal performing strategies in Quadrant I: Global Macro, Event Driven, Distressed Debt.
As economic activity increases, if monetary authorities maintain accommodative policies and credit remains non-restrictive, the Cycle enters Quadrant II, where optimal performing strategies include: Equity Long Only, Credit L/S.
As the economy nears full capacity and credit becomes more restrictive, the Cycle enters Quadrant III (high growth, declining liquidity). Optimal strategies in Quadrant III include Relative Value, Macro, long duration fixed income.
The Cycle terminates in Quadrant IV, where the monetary authorities are attempting to slow economic activity with restrictive monetary policy. In Quadrant IV, exposures are minimized to protect against investment loss. Optimal strategies include long duration fixed income.