Kettera Strategies Heat Map September 2022
Systematic Trend Managers
Long Term trend followers enjoyed yet another solid month of strong trending markets, perhaps one of the best months in years. The best performing positions were short U.S. and Euro bonds and STIR (short-term interest rates), short G10 and EM currencies against a surging USD, and short equities. Short British Pound vs. the USD also appeared to be a particularly successful trade for most programs. On the downside (of which there was not much), long energy positions, mainly crude and natural gas, were generally the least profitable exposures across many trend programs. Metals positions seemed to be mixed, and agricultural markets and softs were slightly negative.
Discretionary Global Macro Managers
In a stark deviation from most of the industry benchmarks tracking discretionary macro programs – which showed these strategies to be negative in September - our Hydra Style Basket was quite positive on the month. The discretionary managers that we track captured some of the same sweeping trends that systematic programs caught, even though the positioning was assumed through a different process. These included short U.S. and Euro bonds, long USD vs. G10 and EM currencies, and short equities. In contrast to the systematic programs, many macro traders also caught the short gold and copper moves - largely the result of the surging USD and the global slowdown/recession fears (particularly the continued covid-related shutdowns in China that can affect demand for metals).
Quantitative Macro Managers
Quant Macro programs, (unsurprisingly) similar to the longer-term Systematic Trend programs above, realized big gains in short bond positions in the U.S. and globally (with the UK 10 Yr. Gilt leading the way). Short foreign currency positions also seemed to be a top winner in September, including short positions in the euro, British pound, Aussie dollar, Canadian dollar and New Zealand dollar. Short positions in U.S. stocks and various foreign stock indices were also profitable for the month. Offsetting the gains were (again, similar to Systematic Trend) trading losses in long energy positions, and in many agricultural markets. Those quants that held short gold and short base metals positions also generally reaped profits in these markets.
Commodities – Industrial (Metals & Energies) Specialists
Metal and energy-related markets had a tough month, as most markets were either sideways or negative, but either way wild and choppy. This resulted in a stark contrast between directional and spread strategies. Most of the directional managers that we follow showed negative months. However, many – if not most - of the relative value and spread programs we track in this sector had some of the best months of the year.
The currency sector has certainly come alive - after years of compressed trading ranges and volatility dampened by the Federal Reserve and other various central banks. September saw continued weakness of most G10 and Emerging Market currencies versus the USD, and many – if not most – of the systematic and discretionary programs we track appeared to catch these big moves. Three of most profitable positions were short British pound, euro and yen versus USD, as well as other notable profitable cross-rate positions involving shorts against the Swiss franc.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. See notes at end of this document for details on the construction of the Hydra "baskets" and the benchmark used for each style class. Also note that some baskets may contain managers that have not yet reported by this date. *=Less than 75% reported. **=Less than 75% reported and absence of a core manager's return.
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- 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.
© The Sortino Group Ltd
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency or other Reprographic Rights Organisation, without the written permission of the publisher. For more information about reprints from AlphaWeek, click here.