VALO CAPITAL
Our Story
"Stocks return 10% a year over the long-term."
"Build a diversified portfolio so that one's view of the future doesn't matter."
We are all familiar with the standard refrains provided by financial advisors. They sound plausible, and they provide clients with a sense of security, which as humans we all crave. However, these "truisms" are dangerously misleading.
Why do stocks go up over time? Does passively allocating to ostensibly unrelated asset classes truly provide protection from systematic risk?
The truth is that there are no immutable laws governing asset markets. The structure of markets and the economic system changes over time. Unfortunately, there is simply too much inertia to get asset managers and economists to appreciate how the financial system has evolved.
Given the current macro landscape this is no longer sufficient. The typical "diversification" strategies employed in the wealth management space- increased allocation to private markets, high yielding stocks, etc. - leave the capital of clients significantly exposed to systemic risk while simultaneously reducing returns.
Valo Capital Management LLC was founded with the primary goal of safeguarding the capital of clients from the increased risks embedded in the structure of equity markets. Furthermore, the team uses its unique expertise in macro trading to structure portfolios that provide insurance that does not 'bleed' premium but rather provides positive returns in addition to providing insurance.
Prior to founding Valo Capital Management LLC, Zachary Cameron advised some of the world's most renowned macro hedge funds. Notably, he forewarned firms of extreme monetary stress preceding the regional banking crisis, of the likelihood that China would significantly underperform coming out of COVID lockdowns, and of a likely collapse in oil markets in the fall of 2023.
Founder and CIO Zachary Cameron attended university at the LSE, where he had the opportunity to learn from some of the most renowned macroeconomists in the world. Following graduation, Zachary worked as a consultant for some of the top macro hedge fund managers.
It was these experiences that made him realize the dearth of understanding regarding how the monetary system operates at both the academic and practitioner levels.
Why wasn't Ben Bernanke able to understand how illiquidity in MBS could precipitate a worldwide financial crisis? Why did mainstream economists and hedge fund managers predict that QE would be (hyper)inflationary?
And, more recently, why weren't central bankers and hedge funds able to predict the resiliency of economies to higher interest rates, or foresee the regional banking crisis?
The short answer is that New Keynesian economics- and its modern adaptation, the 'New Monetary Consensus'- abstracts from money and relies on extremely faulty theoretical foundations.
Because these frameworks were taught to asset manages at university, and because they are echoed in academic journals and in the media, the asset management industry is replete with individuals utilizing the same faulty macro frameworks.
For example, in November 2023, Krishnamurthy et. al published a paper in the NBER that stated "exchange rates seem disconnected from the other macro variables that should determine them... interest rate differences do not predict changes in exchange rates with the right sign", yet interest rates are still utilized by hedge funds as being the primary explanatory variable for exchange rate movements.
While this is a rather simple anecdote, the broader takeaway is that understanding and forecasting the economic environment plays a foundational role in nearly every hedge fund strategy, and incumbent funds are severely lacking in their ability to do so. Valo Capital LLC was thus started as a means to fill a need in the hedge fund industry, with an aim to provide capital allocators with a differentiated and superior return profile.
However, our goal at Valo Capital LLC is not simply to beat our benchmark, but to redefine macroeconomic theory. It is these ambitions that motivate us to work tirelessly for the benefit of our partners and the world at large.