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Making the Case for Hedge Funds Speakers at the Alternative Investment Conference earlier this week spoke out in defense of hedge funds after years of muted performance from some of these firms. According to the Barclay Hedge Fund Index, which looks at reported data from over 1,000 hedge funds and averages out performance, indicates that the industry has only produced double-digit returns once in the past five years. Over the past three years, the index shows returns of 2.88%, 0.04% and 6.10%, respectively. Yet speakers at the New York event, hosted by AIA Group, insisted that there is still value to be found by investing in hedge funds.
CTAs Still in Negative Territory for the Year Although CTA performance improved relative to the previous month, all Societe Generale (SG) Managed Futures indices fell just short of breaking through into positive territory at the end of April 2017. Trend-following had another challenging month in April. The SG Trend Index was down -1.03%, and with 80% of constituent CTA trend strategies contributing negative performance, it underperformed the other CTA indices. It was a mixed result for the broader SG CTA Index, with eight out of the 20 constituent strategies contributing positive performance, and the index remains flat for year.
CTAs Challenged by Divergent Trends Managed futures traders lost -0.44% in March, according to the Barclay CTA Index, which is compiled by BarclayHedge. Year to date, the Index is currently down -0.75%. Due to divergent trends, four of Barclay’s CTA indices recorded gains in March, while four had losses. The Currency Traders Index was up 0.65%, Agricultural Traders gained 0.58%, Financial/Metals Traders were up 0.37%, and Discretionary Traders added 0.16%. In the loss column, Diversified Traders were down -1.15%, and Systematic Traders gave up -0.68%.
New Hedge Fund Index Seeks to Measure Strategy Beta Investable index provider BRI Partners has rolled out what it terms the “next generation of hedge fund indexes” with the launch of the BRI Long/Short Equity Index, calculated by Wilshire Associates. BRI says the strategy is the first of eight strategies that will be rolled out across the coming months, and that the new indices are unique because unlike existing hedge fund indices, the firm’s do not measure the performance of hedge fund managers and, therefore, do not rely on managers to provide a snapshot of month-end results.
Former Fed Chief Dealer Launches Macro Firm Profit & Loss understands that Niall Coffey has formed Avoca Global Advisors, a new global macro firm out of Westport CT. Sources familiar with the matter say that Coffey will seek to launch a hedge fund later this year. Coffey was chief dealer in the Federal Reserve Bank of New York's foreign exchange department during the global financial crisis, with responsibility for US currency related trading operations and advising senior Federal Reserve and US Treasury officials on international market developments.
Hedge Funds, CTAs Up in February Managed futures traders gained 0.71% in February according to the Barclay CTA Index, which is compiled monthly by BarclayHedge. Year to date, the Index has decreased 0.02, however in February, Five of the eight CTA indices had gains. Meanwhile, hedge funds were up 0.99% in February according to the Barclay Hedge Fund Index, which is now up 2.38% after the first two months of 2017, its best start since 2013 when it had gained 2.77% by the end of February.
CTAs Post Strong February Performance February was a strong month for managed futures strategies, with all three Societe Generale CTA indices producing performance in excess of 2%. The SG CTA Index was up 2.27% for the month, the CTA Mutual Fund Index was up 2.19% and the SG Trend Index was up 2.88%. Short-term traders, on the other hand, continued to struggle, with negative returns of -1.95%, putting them at -6.03 for the start of 2017. The Trend Indicator attribution data showed that equity indices, contributing 2.3%, were the main driver of positive returns for trend followers in February with gains from long positions in all markets.
Hedge Funds Outperform Stocks, Bonds: Survey Hedge funds outperformed equities and bonds on a risk-adjusted basis in 2016, according to the Alternative Investment Management Association (AIMA) and data provider Preqin. Hedge funds’ risk-adjusted return, as measured by the Sharpe ratio, was 1.45 for the year, ahead of the S&P 500 (1.1), MSCI World (0.68) and Barclays Global Aggregate (0.20) indices, according to AIMA and Preqin, who based their analysis on a database of more than 3,000 funds. The analysis finds that hedge funds also outperformed stocks and bonds on a risk-adjusted basis over three years and five years.
Buy Side Calls for Swaps Trading Innovation Representatives of buy side firms called for greater innovation and flexibility around swaps execution at the SefCon VII event in New York on January 18, hosted by the Wholesale Markets Brokers’ Association, Americas, and organised by Profit & Loss. Speakers at the event explained that swaps trading has not changed much for the buy side since the introduction of Swap Execution Facilities (SEFs), with most buy side firms executing their swaps transactions via a request for quote (RFQ) format. The only difference now, they said, is that the RFQ occurs on an electronic platform rather than via the phone.
Positive December Can’t Save CTA 2016 Results Data from Societe Generale Prime Services (SGPS) showed an uptick in CTA performance in December 2016, although its flagship index closed the year in negative territory for the first time since 2012. All SG CTA indices posted positive returns in the last month of 2016, at the end of an otherwise difficult quarter. The highest performing index last month was the SG Trend Indicator, which was up 4.07% in December. However, the flagship SG CTA Index closed the year slightly negative -2.86% and the SG Trend Index was at -6.19% for the year.