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Managed Futures Hedge Funds Deliver Solid February To Turn 2021 Performance Positive

Trend-followers and short-term strategies led managed futures hedge funds back to positive territory after a dip in performance at the end of January, with all three SG indices now positive for the year. The flagship SG CTA Index made gains of +2.88% for the month to leave it up +1.64% year to date at the end of February, but the best performance was from the SG Trend Index which ended up +3.64% for the month, and now leads performance year to date +2.86%. All ten of the trend-following constituents in the SG Trend Index recorded individual gains in February after small losses in January, compared to mixed fortunes for other non-trend strategies.

The SG Short-Term Traders Index recorded the best month for shorter-term CTA strategies in aggregate since January 2018, with strong positive performance of +3.13% in February, recovering to leave it up +1.45% year to date. Eight out of the ten individual short-term CTA constituents contributed positive performance, with the best manager recording double digit gains.

Attribution data from the SG Trend Indicator highlighted trend-followers likely made gains in Bonds, Commodities, and Equity indices; with positive contributions from all three of these sectors. In general trend-following strategies could have captured continued downward moves in bond prices, where the simple trend indicator model was positioned short in nine out of the ten markets it tracks;  as well as upwards price momentum in most commodity markets, most significantly the energy complex where for example crude oil was the best contributor to profits, and equity markets which also continued  their recovery from the COVID crash in 2020, albeit at a slightly slower rate.

Tom Wrobel, Director of Capital Consulting, at Societe Generale Prime Services and Clearing, said:

“It was fantastic to see CTAs resume their run of positive performance from the end of 2020, and recover from small losses after markets pulled back slightly at the end of January 2021. Mid-month gains in February peaked at 7.42% for the SG Trend Index after all-time highs in equity markets, but gains were ultimately eroded slightly as rising bond yields and concerns regarding inflation caused markets to retrench. Institutional investor interest in CTAs continues to be high, as many different CTA strategy types were able to take advantage of market conditions in February to post positive performance, led by trend-followers but also including non-trend machine learning and shorter-term programs – the latter which recorded the strongest month’s performance in three years.”

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