Kettera Strategies Heat Map - November 2023
The Style Heat Map below offers a snapshot for the month on all categories of strategies; here are highlights on four of the more noteworthy during the month of November:
Systematic Trend Managers
Long term trend followers had a difficult month with the reversal of several long-standing trends simultaneously. After an early November Fed meeting, the market determined that no further rate hikes would occur, and increased the possibility of sooner cuts in 1H-’24. Bonds and other interest rate markets rallied strongly (yields fell) ending a long-standing and large short exposure in most portfolios. The US Dollar weakened against G10 and EM currencies ending a long USD trend. And with soft economic and tame inflation data, equity indices rallied strongly, ending a downward trend that began in August. It seemed the only sector in which these programs fared well commodities, where a few programs profited from short energy exposures, long softs, and long precious and base metals. Certain G10 currency markets also brought some profits, but these seemed limited. It is difficult to determine with clarity whether longer or medium-term trend programs outperformed (or underperformed, as it was a negative month for most everyone).
Discretionary Global Macro Managers
Discretionary macro programs overall appeared to have a very solid month. (That said, while slightly positive, the discretionary macro managers that we (Kettera) track underperformed the broader industry benchmarks.) A few programs were positioned short bonds and long USD when both trends reversed, and unable to exit and flip positions quickly enough. The more successful programs were nimble enough to catch the strong equity rallies, exit short fixed income exposures, and go long currencies vs. the USD. We also noted that many of the profitable programs were also short the energy complex on weakening overall demand, and long precious metals, namely gold and silver, on the yield drop.
Commodities Specialists – Agricultural Programs
Agricultural commodities traders were largely negative last month, where corn was stuck in a tight range, prices across the soy complex were up on weather concerns in Brazil, and wheat prices were up slightly. Both bullish and bearish fundamental forces pushed and pulled all month long, and both directional and spreads traders were limited by rangebound markets. Programs that were overweight and short cattle markets did well as cash cattle prices sold off sharply in November, pressured by a larger-than-expected scheduled supply of cattle from large feedlots.
FX Specialists
The FX strategies that Kettera follows underperformed the broader FX benchmark in November. Of that set of managers, many of those with fundamental-economic based approaches were positioned long USD – on the sound premise of the US dollar being a more attractive currency supported by higher rates and higher expected growth. However, the greenback reversed course during the month and weakened against most G10 and emerging market currencies, leaving the US Dollar Index (DXY) down 3.5% by month-end. In contrast, systematic price-based programs generally seemed to outperform the more fundamental trading approaches.
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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:
- Blend of Eurekahedge Macro Hedge Fund Index and BarclayHedge Global Macro Index
- The Eurekahedge Macro Index
- The Société Générale Trend CTA Index
- The Société Générale Short-term Traders Index
- The Barclay Hedge Currency Traders Index
- Blend of Bridge Alternatives Commodity Hedge Fund Index and Barclay Discretionary Traders Index (for February only the Barclay index was used as the Bridge index was unavailable.)
- The Barclay Agricultural Traders Index: (same link as above)
- The Eurekahedge Commodity Hedge Fund Index
- Blend of CBOE Eurekahedge Relative Value Volatility Hedge Fund Index and CBOE Eurekahedge Long Volatility Index (same link)
- Blend of Eurekahedge 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.
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