Opalesque Industry Update - The Parker FX Index is reporting a +0.06% return for the month of February. Sixty-
five programs in the Index reported February results, of which thirty-six reported positive results and twenty-nine,
incurred losses. On a risk-adjusted basis, the Index was up +0.02% in February. The median return for the month
was up +0.04%, while the performance for February ranged from a high of +5.23% to a low of -4.20%.|
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 February, the Systematic Index was up +0.29%, while the Discretionary Index declined -0.17%. On a risk-adjusted basis, the Parker Systematic Index was up +0.10% in February, and the Parker Discretionary Index was down -0.12%.
The top three performing constituent programs for the month of February, on a reported basis, returned +5.23%, +5.05% and +4.20%, respectively. The top three performers on a risk-adjusted basis returned +1.65%, +1.40% and +1.34%, respectively.
The currency markets remained volatile in February as escalating tensions in the Middle East triggered heightened risk aversion with sharp pullbacks in global equity markets. Given its status as a “safe haven” currency, the US dollar would typically benefit under these circumstances. Instead, the DXY Index fell -1.09%, with investors favoring the Swiss franc and Japanese yen, which were higher by +0.48% and +1.77%, respectively. The euro and British pound were also strong against the dollar, reflecting expectations that both regions’ central banks would tighten ahead of the US Federal Reserve. Elsewhere the Australian and Canadian dollars appreciated relative to the US dollar on stronger commodity prices and advantageous interest rate differentials. The New Zealand dollar declined -2.33% in February on speculation that the country’s central bank would cut rates following the earthquake that created economists fear will stall economic growth. In emerging markets, headline news has shifted from the highly publicized “currency wars” to that of rising inflation. In response to increasing price pressures, policy makers in China, Indonesia and Russia raised rates +0.5%, +0.25% and +0.25%, respectively, helping their currencies to gain +0.35%, +2.69%, and +3.19%, respectively, versus the US dollar.
The Parker FX Index is a performance-based benchmark that measures both the reported and the risk- adjusted 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 302-month compounded annual return since inception (January, 1986 through February, 2011) is up +11.57% on a reported basis and up +3.11% on a risk- adjusted basis.
From inception (January, 1986 through February, 2011) the compounded annual return for the Parker Systematic Index and the Parker Discretionary Index, on a reported basis, is +11.78% and +9.53%, 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 +3.72%, 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 68 programs managed by 58 firms located in the US, Canada, UK, Germany, Switzerland, France, Ireland, Singapore and Australia. The 68 programs include a combination of 45 programs that are systematic and 23 programs that are discretionary. The 68 programs manage over $48 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 Green. Corporate website: www.ParkerGlobal.com