Risk Monitoring in Global Macro Hedge Fund Strategies

Consider a hedge fund that employs a global macro investment strategy, focusing on identifying macroeconomic trends and utilizing them to make speculative investments across various asset classes worldwide. The fund manager believes that emerging markets are poised for growth due to favorable macroeconomic indicators, such as improving GDP growth rates and rising commodity prices.

The manager plans to take long positions in emerging market equities while simultaneously shorting developed market equities, expecting that the performance gap will widen. This strategy is intended to capitalize on the anticipated outperformance of emerging over developed markets.

In evaluating the risks associated with such a strategy, which of the following potential exposures would be most critical for the hedge fund manager to monitor?