BarclayHedge released its May flash report of commodity trading advisor (CTA) performance this week, which indicated May was a rough month for managers. The report includes managed futures trading programs managing at least $50 million. It was no surprise that May was a tough month for traders as the sharp reversal in the U.S. dollar led many commodity markets to change course abruptly.
The preliminary report showed the Barclay CTA Index down 1.79% and the Barclay BTOP 50 Index down 2.49%.
While many folks like to talk about bubbles and speculators, the culprit for the poor performance appears to be the large reversal in commodities that started at the beginning of May in response to an upward correction in the U.S. dollar.
Another interesting element in the report is that year-to-date the Barclay CTA Index is up 0.53% while the Barclay BTOP 50 Index—which includes managers with the most assets under management — was down 2.34%. This indicates a difficult trading environment for managers with a greater allocation to the most liquid sectors: financial and energies. Our slide show illustrates the key reversals in commodity markets as well as the choppy market conditions in some of the larger sectors.
While each market has its own fundamentals, it is hard to ignore the impact of the dollar, which has recently reversed again and is approaching its May 4 low. CTAs wouldn't mind if the dollar decided on a direction.