Kettera Strategies Heat Map February 2022
Systematic Trend Strategies
Long commodities positioning, particularly in grains and crude markets, were by far the best performers for most longer-term trend programs during the month. Commodities prices were driven by persistently rising inflation, global supply chain disruptions, and escalating geopolitical tensions. Long equities positions, in contrast, were generally the biggest detractors to performance. Foreign exchange trading was flat to negative, with the Australian dollar/USD exchange rate in particular causing setbacks to many programs.
Short-Term / Higher Frequency Trading Strategies
As usual, short-term strategies were a mixed bag, depending on timeframe and markets traded. As a general observation, many programs performed well in commodities and fixed income, but poorly in the FX markets. In commodities, long metals, grains and energies positioning were profitable using momentum strategies. In fixed income and interest rates, short positions in U.S. and European markets seemed to do well. In FX, a strong and sudden reversal mid-month in USD-based exchange rates caused problems for many shorter-term trading systems.
Discretionary Global Macro Strategies
Discretionary global macro programs were generally positive in February with strong gains in long precious metals trades, and profitable in commodities in general. Fixed Income seemed to typically be the second-best performing market sector, with short positioning in both the short and longer ends of the curve. Equities were a slightly negative sector for discretionary macro strategies, but overall a smaller allocation versus fixed income and commodities.
Commodity Specialists – Agricultural Strategies
Grains and livestock trading was mixed in February, depending on whether the manager was primarily directional or using neutral spreads. Directional long, and long-biased, positioning in grains led to healthy gains as poor weather in South America tightened soybean supplies early in the month, and geopolitical turmoil in Ukraine threatened wheat and corn supplies and spiked prices later in the month. Spread and relative value traders, however, did not fare as well. Toward month-end, several programs that were short the front contract in wheat while long the back contracts and were caught in the beginnings of a record-breaking short squeeze in the front trading months. This blew the spread out to by the last two days of the month, a move that unfortunately continued into March.
Commodity Specialists – Industrial Commodities Strategies
Directional metals trading strategies that were long gold performed well, as gold broke out of a long-term choppy range. Silver also broke out to the upside, rewarding long positions. Spread traders did well in the first half of the month, but gave back most if not all gains in the latter part of the month - as many curve structure trades moved against them. This “directional vs spread” contrast also characterized the crude oil markets. Those that were directionally long, or long-biased in spreads, fared well as crude oil continued its sharp ascent. But like wheat spread strategies (see paragraph above), spread traders short the front contracts in crude oil and long the back suffered badly, as the front end rallied much more strongly and quickly expanded the spread.
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- The BarclayHedge Discretionary Traders Index and Barclay Ag Traders Index can be found at http://www.barclayhedge.com/, and details on the NilssonHedge Commodities CTA Index can be found at: https://nilssonhedge.com/index/cta-index/commodities-cta-index
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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