Kettera Strategies' Geographical Analysis - May 2025
In May 2025, various investment strategies experienced different levels of success, influenced by a combination of market volatility, economic growth uncertainty, and central bank policies.
The performance of Systematic Trend Strategies was affected by market volatility and positioning from the previous month. Despite bullish trends in equity and metals, chaotic positioning from April had a negative impact on results. Long-term systematic trend programs also faced difficulties with commodities, particularly short positions in energy like crude and distillates, and fixed income, as rising yields hurt long positions in short-term rates. U.S. and European equity indices, however, were profitable sectors for these programs.
Discretionary Global Macro Strategies were impacted by uncertainty in economic growth rates and geopolitical tensions. Ongoing trade negotiations and tariff uncertainties remained significant factors affecting market sentiment. As a result, these strategies showed mixed performances, with positive programs posting modest gains, while some took larger losses.
Quant Macro Strategies, on the other hand, outperformed both Systematic Trend and Discretionary Macro Strategies, demonstrating resilience in volatile conditions. These strategies leveraged data analysis to navigate complex economic conditions, including trade policy dynamics and central bank actions.
Industrial Commodities programs were mixed, with discretionary fundamental energy programs benefiting from a 6.0% rally in crude and related surges in refined products. However, losses in grains like corn and soybeans due to positioning issues complicated the sector.
Currency Specialists saw little net impact on overall performance as late-month gains offset earlier losses.
The overall market conditions were constructive for equities, but trade negotiations and tariff uncertainties remained significant factors affecting market sentiment. Hawkish central bank messaging and changes in interest rates influenced market dynamics, particularly in fixed income sectors.
The "style baskets" mentioned are research tools created by Kettera for tracking categories, drawn from programs on the Hydra Platform. These are not investible products or index products being offered to investors; they are meant purely for analysis and comparison purposes. The weighting of a program in a basket depends upon which of the three groups the program falls into.
In the Hydra Emerging Manager Basket, weightings are rebalanced every year, with exceptions for extraordinary events. Major FX markets remained largely range-bound, but mid-month reversals created volatility that favoured the agility of shorter-term programs.
It's important to note that hypothetical performance results have many inherent limitations, and there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Indices and other financial benchmarks shown are provided for illustrative purposes only, do not reflect the impact of advisory fees, and may be updated from time to time by the index providers.
Weightings were not increased over time except for going from a "pending" to a fully "approved" program; weighting reductions only occurred if the manager was de-listed or shut its doors. FX programs were generally positive in May, with shorter-term, price-based systematic strategies outperforming their fundamentally driven and discretionary counterparts. Fixed income fared worst, as long positions in short-term rates in both regions suffered from rising yields.
In conclusion, while each strategy faced unique challenges, Quant Macro Strategies demonstrated the most resilience in the volatile market conditions of May 2025.
Investing in Quant Macro Strategies, which leverage technology for data analysis, proved to be resilient in the volatile market conditions of May 2025. On the other hand, the performance of finance strategies focusing on long-term systematic trend programs was heavily impacted by the volatility in commodities, particularly in energy and fixed income sectors, where rising yields and market volatility took their toll on long positions.
