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Kettera Strategies

Kettera Strategies Heat Map - December 2023

The Style Heat Map below offers a snapshot for the month on all categories of strategies; the following are just highlights on four of the more noteworthy style categories during the month of December:

Systematic Trend Following

Although the trend follower benchmarks were negative, several trend programs listed on Kettera’s platform were positive. (Positive enough to make our trend stye bucket slightly positive in December.) While we can usually detect whether it was the managers with shorter- or longer-holding periods that outperformed, this was not clear in December. Whether a program was positive or negative was more determined by allocation and sector weightings. Most programs we track were positive (or flat) in either or both equities and fixed income/rates, catching global equity rallies that began in November, and long bonds-rates (falling yields) in Europe and the US. The most difficult sector was FX, where short Japanese Yen vs. long USD and/or Euro were clearly the worst performing trades, although long USD exposures were generally troublesome across nearly all currencies. Trend follower also appeared to suffer in commodities, although there were small gains in precious metals and softs offset by outsized losses in choppy energies markets (long crude and products) and grains (mixed across soy complex and corn).

Discretionary Global Macro

Discretionary Global Macro performance was positive in December, although there was wide dispersion between the best and worst performers. Successful programs were primarily long US, UK and/or Euro bonds (falling yields) and long global equities, as stocks and bonds continued to rally on the back of the December FOMC meeting and anticipated rate cuts in 2024. FX was a challenging sector, as short Japanese Yen exposure vs. USD was particularly harmful for most programs, and long USD exposures overall were punished as the USD sold off as yields fell. Commodities provided positive performance for some, and negative for others, as trading in energies was challenging, grains trading was mixed, and a few macro programs performed well in precious metals (long gold), and softs (short sugar, long cocoa).

Quantitative Macro

In contrast to their discretionary brethren, the December performance for quantitative macro managers was mixed. Most of the programs that Kettera follows were slightly negative, with substantial dispersion across sectors, markets, and styles. Positive programs were generally long equities, long bonds, and underweight the losses in FX and commodities. December was a month where quant models with  econometric and fundamental inputs outperformed the more price-based programs, and quicker models (shorter duration programs) outperformed the slower moving ones. Allocation (underweight/overweight) was key, as equity indices trading was mixed (some up, some down), as was trading in fixed income-rates. Two sectors seem to be consistently negative, however, FX and commodities. Many programs were “long and wrong” the USD vs. JPY (worst performer), and also long and wrong energy exposures (crude and products). Quant macro positions in grains, softs, precious and base metals ended up with mixed performance.

Commodity Specialists – Agricultural Markets

Grains and livestock programs were generally positive in December, when ranges were tight and market fundamentals painted a picture agreed upon by most traders. Most programs positioned themselves short corn and short the soybeans complex (beans, meal, oil) on improving weather conditions in S. America and plentiful anticipated supply. Relative value traders were generally short-biased both corn and beans, as were directional and options traders. Some managers performed very well in softs, largely those short sugar and/or long cocoa, using both outright directional futures or directional options strategies.

Kettera Strategies


Kettera Strategies

Notes and References:

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.

Benchmark sources:

  1. Blend of Eurekahedge Macro Hedge Fund Index and BarclayHedge Global Macro Index
  2. The Eurekahedge Macro Index (same link as above)
  3. The Societe Generale Trend CTA Index
  4. The Societe Generale Short-term Traders Index (same link as above)
  5. The Barclay Hedge Currency Traders Index
  6. Blend of Bridge Alternatives Commodity Hedge Fund Index and Barclay Discretionary Traders Index
  7. The Eurekahedge Commodity Hedge Fund Index
  8. Blend of CBOE Eurekahedge Relative Value Volatility Hedge Fund Index and CBOE Eurekahedge Long Volatility Index:
  9. Blend of Eurekahedge Asset Weighted Multi Strategy Asset Weighted Index and Barclay Hedge Fund Multi Strategy 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.


The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group

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