Kettera Strategies Heat Map - November 2021

Systematic Trend Programs

Longer-term systematic trend strategies came into the month generally long the prevailing trends and “inflation trade”: long equities, long commodities, and short Fixed Income. But all three of these were hit hard following the Moderna CEO’s comments on the ineffectiveness of Covid vaccines on the new Omicron variant – sparking some quick (and substantial) reversals in these trends on November 26. Long Crude positions hurt the most across the LTTF managers we follow. Short Fixed Income positions hit some programs badly as the world went “risk-off” in a hurry, and global equities, after many hitting all-time highs earlier in the month, sold off quickly in the last days of the month.

Industrial Commodities Specialists

Many programs were caught long the crude oil market when markets suddenly reversed on the late-November Covid news – selling  off dramatically. Many energy specialists were either long outright, or more commonly, held long-biased relative value spreads. A few natural gas traders avoided the petroleum carnage and profited  substantially by only focusing on short exposure to N.American natural gas markets - which decreased by 17% during the month. Metals traders were generally down on the month with losses in base metals spreads, and precious markets, namely long platinum positions.

Agricultural Commodities Specialists

The grain markets spent most of the month in an uptrend, until the last week of the month when markets reacted to negative news about the new Omicron Covid variant.  Although soft commodities, particularly cotton, sugar, coffee and cocoa, experienced more volatile and choppy behavior, these also corrected on the Covid developments. Most ag specialists came into the month bullish on many, if not most markets. With the exception of some of the softs, most managers (even those that may have stopped out temporarily) now appear to skeptical of Omicron’s impact and intend to return to their bullish stances.  

FX Strategies

While FX managers, in the aggregate, had one the best months in some time, there was a large variance in returns among programs. Generally those managers that maintained a substantive long position in the US Dollar – particularly against the currencies of emerging market and commodities-based countries – fared the best. The currencies of EM and commodities-based economies depreciated substantially. Nonetheless, the most popular position appeared to be long USD / short euro. Model-based and systematic currency specialists seemed to have an edge in November, versus their discretionary brethren.

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Kettera Strategies

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-The IndexIQ Hedge Global Macro Beta Index

2-The Societe Generale Trend Index and SG CTA Index

3-The Societe General Short-term Traders Index: (same link as above)

4-The Eurekahedge AI Hedge Fund Index

5-The BarclayHedge Currency Traders Index and BTOP FX Traders Index

6- The BarclayHedge Discretionary Traders Index and Barclay Ag Traders Index and NilssonHedge Commodities CTA Index

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