Opalesque Industry Update - The Parker FX Index is reporting a -1.01% return for the month of January. Sixty-two
programs in the Index reported January results, of which nineteen reported positive results, forty-two incurred
losses and one was flat. On a risk-adjusted basis, the Index was down -0.43% in January.The median return for the
month was down -0.83%, while the performance for January ranged from a high of +4.19% to a low of -9.17%.|
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 January, the Systematic Index was down -1.93%, while the Discretionary Index declined -0.09%. On a risk-adjusted basis, the Parker Systematic Index was down - 0.69% in January, and the Parker Discretionary Index was down -0.07%.
The top three performing constituent programs for the month of January, on a reported basis, returned +4.19%, +4.08% and +3.06%, respectively. The top three performers on a risk-adjusted basis returned +2.83%, +2.59% and +1.83%, respectively.
The currency markets remained volatile in January, the result of the ongoing sovereign debt crisis in Europe, questionable US fiscal policy, the threat of inflation in emerging markets, and political instability in Egypt and Tunisia.
The fiscal crisis in Europe was further complicated following the ECB’s policy statement in early January, which referenced short-term price pressures in the Eurozone. Anticipating imminent interest rate hikes, the euro rallied over +6%.
The credit rating downgrades of both Portugal and Ireland led to a sell off of the euro in the final two weeks of the month. Selling pressure was further amplified after Moody’s placed Greece and Belgium on review for possible downgrades. The British pound gained +2.5% versus the US dollar for the month. During the first half of January, the pound reached the strongest level against the euro in over four months as investors bet that the UK economy was in better shape than the Eurozone nations. In the second half of the month the pound declined -0.8% relative to the US dollar following the news of larger than expected UK CPI figures: inflation hit an 8-month high of +3.7% in December and economists expect it will stay well above +3% through 2011.
Commodity currencies were the worst performers for the month, as commodities, namely precious metals, fell the most in six months. The currencies of the largest gold exporters, including Australia, Canada and South Africa, declined -2.4%, -0.3% and -7.7%, respectively.
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 301 month compounded annual return since inception (January, 1986 through January, 2011) is up +11.60% on a reported basis and up +3.11% on a riskadjusted basis. From inception (January, 1986 through January, 2011) the compounded annual return for the Parker Systematic Index and the Parker Discretionary Index, on a reported basis, is +11.79% and +9.57%, respectively.
From inception, the compounded annualized return, on a risk-adjusted basis, for the Parker Systematic Index and the Parker Discretionary Index, is +2.77% and +3.73%, 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 $43 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.
Founded in 1995, Parker Global Strategies specializes in designing and managing multi-manager hedge fund
strategies for institutional clients across the globe and providing risk management oversight. PGS also designs and
manages niche fund of hedge funds including Currency, US Energy Infrastructure, Transparency, CTAs and Greens...Corporate website:Source