Kettera Strategies Heat Map March 2021
In some months the quant macro group looks more like their discretionary brethren and in others more like systematic CTAs. In March they blazed their own path, with most programs that we track ending the month positive. The common themes appear to be gains in equities and commodities, with the most challenging sector being fixed income.
Most of the FX specialists we track performed well in March. Although currency programs come in all flavours – G10, emerging currencies, short-term vs long term, etc) – we did notice some commonalities. A long USD stance during the month was a winning position, particularly against the major G10 units. Many fundamentally-driven managers were actually initially poised for dollar weakness, but most of these were able to either stem their losses or pivot as the greenback strengthened.
Systematic CTAs faced a multitude of unexpected inflection points, the biggest examples coming in fixed income and softs commodities. But most were profitable, particularly those with long positions in North American and European equity index positions or short crude oil. Also, trend followers that were nimble enough to catch the unanticipated strength in the USD enjoyed a strong month in currencies.
In commodities strategies, energy traders were generally positioned long in anticipation of increased demand from diminishing pandemic restrictions, but oil sold off throughout the month. Metals traders faced choppy base and precious markets, as copper's rally finally stalled, and silver sold off. Both spreads and directional trades had difficulty navigating the mixed messages of continued lockdowns and trillion dollar infrastructure promises. For agricultural specialists, most of the grain trading programs we track held bullish views in corn and soybeans, although some sharp liquidation selling (largely by passive commodities index products) provided some mid-month choppiness. A USDA acreage report on March 31 sent corn and soybeans soaring, rewarding bull spreads and outright long positions.
Idiosyncratic factors rolled through the equity markets in March. Event-driven specialists that had previously befitted from the tech sector were hurt as tech deals lost momentum - driven, at least in part, by the Archegos liquidation. The SPAC market, which had benefitted managers for quite some time, cooled off considerably over the month. These factors drove a good deal of dispersion among the managers that we follow in this space.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. See notes at end of this document for details on the construction of the Hydra "baskets" and the benchmark used for each style class. Also note that some baskets may contain managers that have not yet reported by this date. *=Less than 75% reported.
For the “style classes” and “baskets” presented in this letter: The “style baskets” referenced above were created by Kettera for research purposes to track the category and are classifications drawn by Kettera Strategies in their review of programs on and for the Hydra Platform. The arrows represent the style basket’s overall performance for the month (e.g. the sideways arrow indicates that the basket was largely flat overall, a solid red down arrow indicates the basket (on average) was largely negative compared to most months, etc.). The “style basket” for a class is created from monthly returns (net of fees) of programs that are either: programs currently or formerly on Hydra; or under review with an expectation of being added to Hydra. The weighting of a program in a basket depends upon into which of these three groups the program falls. Style baskets are not investible products or index products being offered to investors. They are meant purely for analysis and comparison purposes. 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, 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.
1-The IndexIQ Hedge Global Macro Beta Index can be found at: https://www.newyorklifeinvestments.com/indices/iq-hedge-global-macro-beta-index-iqhggmb?ticker=IQHGGMB
2-The Societe Generale Trend Index and SG CTA Index can be found at: https://cib.societegenerale.com/en/prime-services-indices/
3-The Societe General Short-term Traders Index: (same link as above)
4-The EurekaHedge AI Hedge Fund Index https://www.eurekahedge.com/Indices/IndexView/Eurekahedge/683/Eurekahedge_AI_Hedge_fund_Index
5-The BarclayHedge Currency Traders Index and BTOP FX Traders Index can be found at: http://www.barclayhedge.com/
6- S&P GSCI Metals & Energy Index and S&P GSCI Ag Commodities Index can be found at: https://us.spindices.com/index-family/commodities/sp-gsci
7-The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index can be found at: http://www.eurekahedge.com/Indices/IndexView/Eurekahedge/641/CBOE_Eurekahedge_Relative_Value_Volatility_Hedge_Fund_Index
8-The Eurekahedge-Mizuho Multi-Strategy Index: (See above)
9-The Eurekahedge Long Short Equities Hedge Fund Index: (See above)
10-Blend of BarclayHedge Equity Market Neutral Index: http://www.barclayhedge.com/ with EurekaHedge Equity Mkt Neutral Index (see link above)
11 – Barclay Crypto Traders Index.
INDICES AND OTHER FINANCIAL BENCHMARKS SHOWN ARE PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY, ARE UNMANAGED, REFLECT REINVESTMENT OF INCOME AND DIVIDENDS AND DO NOT REFLECT THE IMPACT OF ADVISORY FEES. INDEX DATA IS REPORTED AS OF DATE OF PUBLICATION AND MAY BE A MONTH-TO-DATE ESTIMATE IF ALL UNDERLYING COMPONENTS HAVE NOT YET REPORTED. THE INDEX PROVIDERS MAY UPDATE THEIR REPORTED PERFORMANCE FROM TIME TO TIME. KETTERA DISCLAIMS ANY OBLIGATION TO VERIFY THESE NUMBERS OR TO UPDATE OR REVISE THE PERFORMANCE NUMBERS.
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