Kettera Strategies Heat Map June 2022

Systematic Trend Managers

Long term trend following programs were generally positioned in a similar fashion across all markets, with the biggest differentiator being how the portfolio over- and under-weighted key sectors. The more profitable programs appeared to emphasize short fixed income and short equities indices positions, although nearly all programs seemed to sustain losses in long energy (crude oil / natural gas) positions and long ag commodities. In fact, June was a rare case in which the trend followers in Kettera’s style basket underperformed the industry benchmark, as many of our managers appeared to be over-allocated to long positions in energy and ag commodities.

Discretionary Global Macro Managers

Most of the discretionary global macro managers we follow were quite diversified in exposures and concentrations across all markets. This is an indication of how tricky the current global macroeconomic environment has been to navigate, as the world deals with higher inflation numbers, recession fears, monetary tightening, and geopolitical upheaval. Successful programs were short fixed income and rates, particularly in Europe, and were long USD vs. G10 and commodity currencies such as the Aussie dollar, Canadian dollar, Brazilian real and South African rand. The discretionary macro programs we follow appeared to be hardest hit in the commodities sector, especially from long exposures in the energy markets, grains, and base metals, as macro fears overwhelmed underlying micro fundamentals.

Commodity Specialists -   Agricultural (Grains / Livestock)

Most grain trading programs, whether using spreads or outright directional trades, appeared to start the month with either a long bias in the grain markets or with very light positioning – and not much in between. Long-biased portfolios lost on the month as grains reversed mid-month due to “less damaging than expected” weather forecasts in the US, increasing recession fears, renewed lockdowns in China, and a benign USDA acreage report released at month-end that saw grains markets sell off sharply. Few programs, it seemed, were willing to take the risk of going short and capitalize on the broad-based selloff.

Commodities Specialists -  Industrial (Energy / Metals)

In Kettera’s style basket for this strategy category was slightly negative in June, as performance from metals programs overwhelmed positive performance from energy programs. Base metals sold off harshly on macroeconomic fears of recession and lower demand expectations, which overwhelmed fundamental traders that were positioned long (or long-biased) based on bullish underlying supply shortages. Precious metals, especially gold, are often held as an inflation hedge, but with a strong USD and rising yields, gold and silver sold off as well. Energy traders, especially spread traders in natural gas, were generally able to profit from falling prices, although some were rewarded with long exposure to European power.

Shorter-Term Strategies

Always a difficult category to generalize on, short-term trading covers a wide variety of programs, of varying holding period lengths. In June, however, there were a few common themes. Intraday breakout-based systems seemed to fare well, particularly in FX and equities indices (the latter particularly on the short side).  The most difficult sector for most programs was fixed income, particularly in the middle part of the month when the bond trend changed directions.

NOTES:

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 Hedge Fund Intelligence Global Macro Index and Eurekahedge Macro Hedge Fund Index

The Hedge Fund Intelligence Global Macro Beta Index can be found at: https://data.hfm.global/funds4/public/indices/default.aspx

The Eurekahedge Macro Hedge Fund Index can be found at: https://www.eurekahedge.com/Indices/IndexView/Eurekahedge/481/Eurekahedge-Macro-Hedge-Fund-Index

2-                The Hedge Fund Intelligence Global Macro Beta Index: (same link as above)

3-                The Societe Generale Trend Index can be found at: https://cib.societegenerale.com/en/prime-services-indices/

4-                The Societe Generale Short-term Traders Index: (same link as above)

5-                The Eurekahedge AI Hedge Fund Index: https://www.eurekahedge.com/Indices/IndexView/Eurekahedge/683/Eurekahedge_AI_Hedge_fund_Index

6-                The Barclay Hedge Currency Traders Index can be found at: http://www.barclayhedge.com/

7-                Blend of Barclay Discretionary Traders Index and Bridge Alternatives Commodity Hedge Fund Index

                    The Bridge Alternatives Index can be found at: https://www.bridgealternatives.com/commodity-hedge-fund-index

The Barclay Discretionary Traders Index can be found at: http://www.barclayhedge.com/

8-                The Barclay Agricultural Traders Index: (same link as above)

9-                The Barclay Fixed Income Arbitrage Index: (same link as above)

10-              Blend of Eurekahedge Relative Value Volatility Hedge Fund Index and Eurekahedge Long Volatility Index:                    https://www.eurekahedge.com/Indices/

11-              Blend of Eurekahedge Asset Weighted Multi Strategy Asset Weighted Index and Barclay Hedge Fund Multi Strategy Index

The Eurekahedge Asset Weighted Multi Strategy Asset Weighted Index can be found at: (same link as above)

The Barclay Hedge Fund Multi Strategy Index can be found at: http://www.barclayhedge.com/

12-              Eurekahedge Event-Driven Hedge Fund Index: https://www.eurekahedge.com/Indices/

13-              The Barclay Hedge Crypto Traders Index can: http://www.barclayhedge.com/

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.