Following an initial positive run in the first few days of the year, all CTAs in the Societe Generale (SG) Indices were in negative territory by the end of January. The SG Trend Index was down 3.25% and the SG Short-Term Traders Index was down 1.71%. The SG CTA Index returned -1.99% despite being helped slightly by three non-trend following managers' positive performances during the month.The SG Trend Indicator attributed losses to equity markets and currencies. They were positioned short in risk assets, hence equity markets' reversal and gains in one of their best Januarys ever, contributed to losses of 3.91% at the portfolio level.
A new report from RCM Alternatives highlights the struggles of Commodity Trading Advisors (CTAs) in 2018.The report, Managed Futures/Global Macro 2018 Strategy Review, notes that last year was generally a disappointing one for managed futures and global macro across most strategy groups. This is perhaps surprising, given that there were significant sell-offs in the equities markets in 2018, which is when the diversification benefits of having CTAs in the portfolio is supposed to be felt.
As the report explains: “With equities getting hit hard, this was a prime opportunity for CTAs, managed futures and macro to come off the mat and show investors the power of diversification. Instead, the lesson was that sometimes non-correlation does not equal negative correlation, especially in the short term.”
The availability of liquidity is the biggest daily issue facing FX traders right now, according to a new survey by JP Morgan.The survey results come from 200 of JP Morgan’s largest Institutional clients, with the majority being FX traders and the rest being rates and commodities traders.In total, 40% of survey respondents cited liquidity availability as the biggest day-to-day issue facing traders in 2019, with 25% instead pointing to efficiency of process, 18% to best execution requirements and 17% to price transparency
German asset manager 7orca Asset Management AG has expanded its use of IHS Markit’s ThinkFolio solution to include its order management and portfolio modeling solution.
Formed in 2017, 7orca is an independent German asset manager that has been using thinkFolio for over a year to support its currency overlay and short volatility investment strategies for institutional clients.
“Since establishing 7orca, we have focused on providing our clients with a quantitative investment process to actively hedge currency risks,” says Jasper Duex, CIO at 7orca Asset Management.
Currency trading was one of the few bright spots for CTA performance last year, according to new data from BarclayHedge, now a division of Backstop Solutions.While the Barclay CTA Index was down 2.85% for 2018, the Currency Traders Index was up 5.1% for the year, and the Discretionary Traders Index gained 2.01%.These, however, were the only two indices to post positive returns for the year.
Indices posting losses on the year were led by the Cryptocurrency Traders Index, which was down 63.24% through December. The MPI Barclay Elite Systematic Traders Index was down 5.12% for the year, the Diversified Traders Index declined 4.71%, the Systematic Traders Index dropped 4.16%, the Fin./Met. Traders Index was down 3.20%, and the Agricultural Traders Index was down 0.27%.
Hedge funds dipped 2.61% in December, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions, meaning it was down 5.08% for the year.
The loss was less significant, however, than that of the S&P 500 Total Return Index, which dropped 9.03% in December, to end down 4.38% for 2018.
While lowering its projections for future interest rate hikes, the US Federal Reserve raised its benchmark rate a quarter-point in December. That, coupled with extreme volatility in equity markets was a major factor in December’s hedge fund downturn, BarclayHedge says.
State Street Global Exchange has released the results of the State Street Investor Confidence Index (ICI) for December 2018, showing that confidence fell 2.8 points to 79.8. This compares to November’s revised reading of 82.6.
There was a real geographical divergence in the Index, confidence among North American investors waned, with the North American ICI decreasing from 79.2 to 74.1, while the European ICI had an up-tick of 2.1 points to 94.0 and the Asia ICI increased by 8.7 points to 110.6.
The flash estimate for the Barclay CTA Index, compiled by BarclayHedge indicates a small profit of 0.01% in November. Year to date, the Index is down 3.00%.
“Although the November return for the Index was right at zero percent, the dispersion of returns of the underlying funds was quite large, ranging from a high of plus 30.74 percent to a low of minus 40.40 percent,” says Sol Waksman, founder and president of BarclayHedge.
Eight of the nine Barclay Managed Futures indices had a negative return in November. Cryptocurrency Traders fell 22.64%, MPI Barclay Elite Systematic Traders lost 1.64%, Agricultural Traders were down 0.50%, and Discretionary Traders lost 0.25%.
Hedge Funds slid 0.28% in November according to the Barclay Hedge Fund Index compiled by BarclayHedge, which is now owned by Backstop Solutions, versus a 2.04% increase in the S&P 500 Total Return Index. Year to date, the Barclay Hedge Fund Index is down 2.42%, while the S&P has gained 5.11%.
“Global equity markets had mixed returns in November as European markets fell while the US and Asia rose,” says Sol Waksman, founder and president of BarclayHedge. “An 18.4 percent drop in the price of Apple along with declines in Facebook and Netflix – stocks that are widely held by hedge funds – created additional losses for technology funds.”
Following a difficult October, CTAs continued to face challenges in November as the SG CTA Index was down 1.09% and the SG Trend Index was down 1.75%. Year-to-date, the SG CTA Index is down 7.18%.
However, the SG Trend Indicator outperformed the Trend Index as it was up 2.51%. This was driven by gains in commodity markets especially from short positions in the energy sector.
Apart from the uplift in commodities, trend following strategies struggled in other sectors with losses in currencies and equities. There were strong reversals against established trends in particular in Australian and New Zealand dollar. Furthermore, trends in bond markets continued to be mixed, as the new upward momentum brought the recent downward trend to an end.