Strategy Heats Map for Kettera - February 2020
In February 2021, U.S. equity markets experienced volatility driven by uncertainty around policy shifts and economic data surprises. The S&P 500 declined modestly (-1.3%), while small caps fell more sharply (-5.4%) amid shifting investor sentiment.
This volatile environment was particularly favourable for short-term and higher-frequency equity programs. These strategies typically capitalize on immediate market reactions to new data releases and short-lived volatility spikes, as evidenced by sharp volume changes within minutes around economic announcements.
However, the performance of discretionary macro and quantitative strategies varied. Discretionary macro strategies rely on broader economic views and policy assessments, adjusting exposures based on evolving narrative and risks such as stagflation signals noted in February 2021. Quant strategies, on the other hand, factor in multi-factor models, including volatility regimes and trend information, which could moderate risk exposure during uncertain periods.
AI and machine learning-based strategies were affected by the rising volatility markets. The equity market neutral category was a mixed bag, with some ending up flat or slightly up, while others followed the "give it all back" path of their long-short brethren.
The Eurekahedge AI Hedge Fund Index, Eurekahedge Long Short Equities Hedge Fund Index, and the Eurekahedge-Mizuho Multi-Strategy Index were among the indices used in the analysis. Programs that de-weighted equities indices or had models quick enough to flip direction and get short the indices performed better.
In contrast, event-driven programs faced a tough final week of February as spreads widened and more directional positions moved down. Currencies, energies, and metals generally performed positively for short-term programs, while the equities sector was the most prevalent culprit for poor performance in February.
Deal volumes in February were tracking to be on par with January, in sharp contrast to the strong level of deal announcements toward the end of 2019. It's important to note that the available data indicates in February 2021 equities fell with uneven reaction across sectors, while volatility and volume from economic surprises created active trading conditions favourable to short-term trading. However, insights on actual comparative performance metrics for these strategy types during that month are not provided.
Kettera, a research firm, disclaims any obligation to verify these numbers or to update or revise the performance numbers. The indices and other financial benchmarks shown are for illustrative purposes only and do not reflect the impact of advisory fees.
In summary, short-term and higher-frequency equity programs likely benefited from the elevated volatility and rapid reaction to economic surprises in February 2021, whereas discretionary macro and quantitative strategies' performance depended on their ability to interpret and position around the evolving economic landscape, which was complex due to stagflation concerns. Precise performance comparisons require proprietary fund data or specialized reports not available in the current search results.
- Investors utilizing short-term and higher-frequency equity programs found the volatile environment in February 2021 particularly advantageous due to the immediate market reactions to new data releases and short-lived volatility spikes.
- AI and machine learning-based strategies, used in analyzing equities markets, were affected by the rising volatility, with the equity market neutral category showing mixed results. These strategies typically factor in data-and-cloud-computing technologies for decision-making in finance and investing, offering unique perspectives in uncertain periods.
