Kettera Strategies Heat Map - May 2025

For the month of May, the following summaries highlight five (5) of the ten style categories that we track.

Systematic Trend

Long-term systematic trend programs faced another challenging month in May, though with different dynamics than in April. After April’s tariff turmoil, May began on an optimistic note with trade deal hopes, solid corporate earnings, and stable unemployment and inflation data. Looking solely at the bullish equity index and precious metals price charts for May, one might assume a banner month for trend programs. However, one has to keep in mind the chaos-induced positioning that these programs carried in from the previous month. Comparing May vs. April, crude and products were up after being down, grains were down after being up, metals were mixed, and coffee was off around 10% after a strong rally earlier this year. U.S. and European equity indices were the most profitable sectors across nearly all programs in May. In contrast, fixed income fared worst, as long positions in short-term rates in both regions suffered from rising yields, driven by hawkish central bank messaging, a U.S. credit downgrade by Moody’s, and increased debt issuance. Programs nimble enough to catch the early downward shift did better. Currencies had little net impact, with late-month gains offsetting earlier losses. Commodities were difficult again, particularly due to short positions in crude and distillates like gasoil, which were hurt by energy rallies. In agriculture, long grain positions—especially corn and soybeans—saw partial losses, while livestock exposure held up better.

Discretionary Global Macro

Discretionary global macro programs were mixed, with positive programs posting modest gains, while a few programs - including some of those that we track - took larger losses.  For the negative performers, the main culprit seemed to be long positioning in short-duration rates, particularly US 2-Yrs and European rates. Discretionary traders expected the Fed and other central banks to signal looser policy and initiate rate cuts, but the Fed held firm on rates, kept a hawkish bias, and a ratings downgrade by Moody’s on US credit due to ever-increasing debt caused short-term yields to rise instead. Beyond this core exposure, most global macro strategies also dabbled in long gold (a small loser) and FX (mostly flat on choppy and tightly rangebound trading). Base and precious metals were mixed, while energy trading, particularly in crude oil, was the wild card of the month for macro: Some cashing in, while others were caught wrong-footed in this market, which saw a +6.0% rise despite global demand outlook and increased supply announcements from OPEC.

Quant Macro

Quant macro programs seemed to outperform not only the price-driven systematic trend players, but also their discretionary macro brethren. Ironically, those quant macro programs with a price-based element appeared to navigate May better than those relying entirely on econometric/fundamental inputs. Econometric quant strategies struggled with the whipsaw price action across asset classes beginning in April and continuing into May. In some cases, we noted that long VIX hedging offset gains from long European and US equity index positions. In fixed income. Rising yields also hurt long positions in the shorter-term end of the yield curve, as models anticipated central banks taking action to lower interest rates – something that never materialized. FX trading was mostly neutral with gains offsetting losses. Those macro programs trading commodities saw mixed results. In all, different programs succeeded and suffered in different markets, demonstrating the confusion amongst forecasts and expectations caused by tariff on/off uncertainty. But it’s a safe conclusion that programs with a price-based component, performed better – as these systems likely got the programs long equity indices, long energy markets, and long certain industrial metals.

Commodities Specialists – Industrial Commodities (Metals & Energy)

Industrial commodities programs were mixed in May, although it appears the programs we follow most closely outperformed the broader universe. Discretionary fundamental energy programs, particularly those trading directionally (vs spreads), seemed to benefit from a 6.0% rally in crude and related surges in refined products. That being said, we noted that energy spread traders also eked out some small gains. Natural gas traders focused on N. American markets also seemed to benefit by capturing falling prices, as nat gas sold off on mild weather and an ample supply outlook. Power traders (focused on electricity markets), however, did not have a good month. In metals, discretionary metals specialists generally underperformed their energy brethren, as prices did not behave as indicated by the fundamentals. As the US dollar continued to weaken and US debt figures continue to mount, traders expected a bigger upwards move in dollar denominated metals markets, but the rally never arrived and performance was weak.

Currency Specialists

FX programs were generally positive in May, with shorter-term, price-based systematic strategies outperforming their fundamentally driven and discretionary counterparts. Fundamental and macro-oriented currency managers contended with a challenging landscape shaped by a weakening U.S. dollar (the USDX has declined nearly 10% YTD—its worst 5-month start in history), shifting central bank policies, and intensifying geopolitical tensions. In early May, the USD strengthened on tariff-related developments, buoyed by news of a US/UK trade deal and a 90-day rollback of US-China tariffs. However, the second half of the month saw a sharp reversal as Moody’s, the last major agency maintaining a AAA rating, downgraded U.S. government debt—further compounded by proposed tax cuts that raised alarms about the growing debt burden. For those FX programs trading precious metals, results in those markets were mixed. In short, while major FX markets remained largely range-bound, mid-month reversals created volatility that favored the agility of shorter-term programs.

Kettera Strategies Heat Map - May 2025

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.

**=less than 75% reported and absence of a core manager's return.

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Kettera Strategies

Footnotes

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Kettera Strategies. 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.

Kettera Strategies LLC is a Member of the National Futures Association and registered as a Commodity Pool Operator and only provides services to Accredited Investors who are Qualified Eligible Persons as defined in section 4.7 of the Commodity Exchange Act. This document, any attached document and cover email are being furnished to you on a confidential basis and may not, without prior written consent of Kettera Strategies LLC be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the intended recipient of this email. This document, and any related documents or emails, are neither offers to sell any securities, nor solicitations of an offer to invest in any fund or product.

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.

Further notes on Hydra Emerging Manager Basket: Weightings among managers were rebalanced every year, with exceptions for extraordinary events (e.g. the Covid market collapse). Weightings are not discretionary. Manager weightings were not increased over time except for going from a “pending” to a fully “approved” program; weighting reductions only occurred if the manager was de-listed or shut its doors – otherwise the managers stayed as is regardless of performance. Weightings are equal for any approval category: e.g. all fully approved managers may get a X% weighting, regardless of volatility/exposure levels or correlation with other strategies.

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-            With Intelligence Systematic Macro Hedge Fund Index

2-            With Intelligence Macro Hedge Fund Index

3-            The Societe Generale Trend CTA Index

4-            The Societe Generale Short-term Traders Index

5-            The Barclay Currency Traders Index

6-            Blend of Bridge Alternatives Commodity Hedge Fund Index and BarclayHedge Discretionary Traders Index

7-            The Barclay Agricultural Traders Index

8-            The Nilsson CTA Commodities Index

9-            Blend of With Intelligence Volatility Arbitrage Index and With Intelligence Long Volatility Hedge Fund Index

10-         Blend of With Intelligence Institutional Equity Hedge Multi Strategy Index and BarclayHedge 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.

Past performance is not necessarily indicative of future returns.

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