Kettera Strategies' June 2021 Heat Map Analysis
In the world of Managed Futures and Hedge Funds, June 2021 presented a complex landscape, with several strategies facing setbacks, particularly in the fixed income and currency markets.
According to the Kettera Strategies report, the negative performance of longer-term systematic trend-following programs during this period was primarily due to a lack of sustained directional trends. The markets, characterized by increased volatility and frequent reversals, diluted the trend signals that such programs rely on. As a result, the persistent trends these strategies thrive on were absent or disrupted, causing longer-term trend-following models to underperform. Macroeconomic factors and central bank communications during this period may have contributed to the market uncertainty and choppiness, further challenging trend continuation.
The FX sector showed a divide, with some managers' econometric models predicting a US dollar resurgence, while others saw inflation as a negative for the greenback. Directional trades in commodities, especially long metals (long inflation), posed challenges to managers in June. However, industrial commodities specialists, including Nat Gas traders and crude strategies, managed to stay positive.
Commodities saw gains in energy markets, notably natural gas, offset by losses in precious metals and grains markets. The hawkish U.S. Fed announcement mid-month led to robust price movements in the short and medium term.
In contrast, currency specialists performed well in June, with systematic strategies outperforming discretionary strategies. The BarclayHedge Currency Traders Index and BTOP FX Traders Index reflect this trend.
In the equity sector, the EurekaHedge Long Short Equities Hedge Fund Index faced its own challenges. Many discretionary global macro managers experienced a reversal of positions that had worked in May, particularly in gold and the US dollar.
The Barclay Crypto Traders Index and the Eurekahedge AI Hedge Fund Index, representing the cryptocurrency and artificial intelligence sectors respectively, did not escape June's volatility either.
The Eurekahedge-Mizuho Multi-Strategy Index, which encompasses a variety of strategies, also felt the impact of the market conditions.
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In quant macro, strategies with positive months tended to focus on or include relative value (RV) and spread models in the commodities markets. The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index, for instance, may have benefited from this approach.
Despite the challenges, it's clear that June 2021 was a month of dynamic market movements, testing the mettle of various strategies and managers. As always, the futures and hedge fund landscape continues to evolve, offering opportunities and challenges in equal measure.
- Tech-savvy investors might consider exploring investment opportunities in quantitative macro, as strategies that performed well in June, such as those focused on relative value and spread models in the commodities markets, often require advanced technology and data analysis.
- Given the complexity of the June 2021 market landscape, with many traditional strategies facing setbacks, individuals or firms with expertise in financial technology could potentially leverage these developments to develop new investing approaches or enhance existing ones.
