Opalesque Industry Update - The Parker FX Index is reporting a +0.45% return for the month of December. Sixty-two
programs in the Index reported December results, of which thirty-five reported positive results and 27
incurred losses. On a risk-adjusted basis, the Index was up +0.18% in December. The median return for the
month was up +0.42%, while the performance for December ranged from a high of +9.80% to a low of -8.23%.
For 2010, the Parker FX Index is up +2.12%.|
In addition to the broad Parker FX Index, there are two style driven sub-indices: the Parker Systematic Index, which tracks those managers whose decision process is rule based, and the Parker Discretionary Index, which tracks managers whose decision process is judgmental. During December, the Systematic Index was up +1.10%, while the Discretionary Index declined -0.21%. For the year, the Systematic Index is up +2.65% and the Discretionary Index is up +1.58%. On a risk-adjusted basis, the Parker Systematic Index was up +0.39% in December, and the Parker Discretionary Index was down -0.16%.
The top three performing constituent programs for the month of December, on a reported basis, returned +9.80%, +8.64% and +5.60%, respectively. The top three performers on a risk-adjusted basis returned +3.38%, +2.92% and +1.65%, respectively.
During the month mixed US economic data and renewed buying of the euro and commodity-sensitive currencies pushed the US dollar lower, with the DXY falling -2.7% on the month. The dollar came under further selling pressures as investors favored higher yielding assets on speculation of a sustainable global economic recovery.
The euro, which gained +2.6% versus the USD, initially benefitted from increased demand for risky assets, however it fell nearly -1% vs. the dollar in the final two weeks of the month, following credit rating downgrades in Portugal and Ireland. Furthermore, Moody’s placed Greece and Belgium on review for possible downgrades. The British pound was the worst performing currency in the majors, depreciating -0.35% against the US dollar on increased inflation expectations. With commodity markets rising during the month, many commodity currencies rallied against the US dollar. Despite torrential rains that hampered gold and coal production, Australia’s currency rose +5.8% amid strengthening demand for commodities from China. Other significant commodity currencies included the Norwegian krone and the South African rand, which rose +6.1% and +7.5%, respectively, versus the USD.
The Parker FX Index is a performance-based benchmark that measures both the reported and the riskadjusted returns of global currency managers. It is the first index used to analyze unleveraged (risk-adjusted) performance in order to calculate pure currency alpha, or manager skill. The 300 month compounded annual return since inception (January, 1986 through December, 2010) is up +11.69% on a reported basis and up +3.14% on a riskadjusted basis.
From inception (January, 1986 through December, 2010) the compounded annual return for the Parker Systematic Index and the Parker Discretionary Index, on a reported basis, is +11.92% and +9.61%, respectively.
From inception, the compounded annualized return, on a risk-adjusted basis, for the Parker Systematic Index and the Parker Discretionary Index, is +2.80% and +3.74%, respectively.
The Parker FX Index tracks the performance, or value-added, that managers have generated from positioning long or short foreign currencies. The Index is equally weighted, as opposed to capitalization weighted, to preclude very large managers from swaying the performance in a direction that may not be representative of the currency manager universe. Parker Global Strategies applies its model to the performance of a representative currency portfolio or composite, net of fees, and excluding interest for each currency manager.
The Parker FX Index currently includes 70 programs managed by 61 firms located in the US, Canada, UK,
Germany, Switzerland, France, Ireland, Singapore and Australia. The 70 programs include a combination of 45
programs that are systematic and 25 programs that are discretionary. The 70 programs manage over $42 billion in
currency strategy assets. The Index also includes the performance of currency managers who are no longer trading in
order to address survivorship bias. Disciplines include technical, fundamental and quantitative...Corporate website: Source