Divergence between discretionary and quant or model-driven macro programs
Trend following strategies had a correction month
Most Agricultural commodities specialists followed seemed to have a positive month
What's Working In Tactical Asset Allocation Strategies
Sneak peek at September hedge fund and managed futures returns from Kettera Hydra Platform Investor Letter.
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Breakdown of September Hedge Fund Returns
Kettera Strategies Hedge Fund Platform Key Insights
Key Insights:
#1 In global macro, with some notable exceptions, we noted once again a divergence between discretionary and quant or model-driven macro programs. Most discretionary macro strategies appeared to have a good month, particularly those with short North American fixed income positions. Macro programs with commodities exposure also seemed to fare better than others.
#2 While quant macro strategies generally seemed to perform less well, models with purely fundamental inputs seemed to navigate the markets the best. Those with any systematic trend elements encountered more problems – especially with the retreat in bonds in the month’s first half.
#3 Trend following strategies had a correction month, with several programs surrendering a good portion of their YTD returns. The leading source of losses was fixed income, where many models found themselves on the wrong side of the bond retreat. Positives included shorting non-US equities indices and some FX positions, but these were typically not enough to stem the tide.
#4 Short-term and higher-frequency programs, which had enjoyed a solid 2019 so far, also saw a giveback month. The losing sectors were largely the same as those for trend programs above (fixed income being the most challenging).
#5 Most agricultural commodities specialists we follow seemed to have a positive month. Many traders capitalized on long positions in soybeans and livestock.
#6 Currency specialists put in a generally uneventful month, as most exchange rates were choppy and sideways in September and carry programs did not have much to offer.
#7 The performance of the various equities-based strategies we’ve been focusing on – both L/S equities programs and market neutral strategies – appeared to differ so greatly it is difficult to generalize on a theme. Overall, we did not witness too many substantially negative numbers, as most were flat to positive.
Disclosure Notes:
The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, neither Kettera nor the author make any representation or warranty, express or implied, as to the information's accuracy or completeness, nor do Kettera or the author recommend that the attached information serve as the basis of any investment decision. This is provided to you solely for informational purposes only and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.
For the “style classes” and “baskets” presented in this letter: The “average” referred to above is an average of two inputs: (i) performance of a “style basket” created by Kettera for research purposes to track the category and (ii) the third-party benchmark for that category. The “style basket” for a class is crated from monthly returns (net of fees) of programs that are either: (1) currently listed programs on Hydra, (2) programs that have been de-listed or terminated from Hydra (for a holdover period of 12 months), or (3) programs currently under review by Hydra with an expectation of being on-boarded. The weighting of a program depends upon which of these three groups the program falls into; programs of a common group are equally weighted (and not volatility adjusted). These baskets are not investment products or index products being offered to investors. They are meant purely for analysis and comparison purposes, so the reader can gain a greater understanding of a style class. These also were not created to stimulate interest in any underlying or associated program.
Nonetheless, as these research tools may be regarded to be “hypothetical” combinations of managers, please read the following warning: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY PRODUCT OR ACCOUNT WILL ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Benchmark sources:
3-The Societe General Short-term Traders Index: (same link as above)
4-The EurekaHedge AI Hedge Fund Index
5-The BarclayHedge Currency Traders Index and BTOP FX Traders Index can be found at: http://www.barclayhedge.com/
8-The Eurekahedge-Mizuho Multi-Strategy Index: (See above)
9-The Eurekahedge Long Short Equities Hedge Fund Index: (See above)
11- The Eurekahedge Market Neutral Hedge Fund Index: (See above)
