Opalesque Industry Update – The Parker FX Index is reporting a -0.79% return for the month of June. Sixty-five
programs in the index reported June results, of which twenty-two reported positive results and forty-three incurred
losses. On a risk-adjusted basis, the Index was down -0.33% in June. The median return for the month was down -
0.72%, while the performance for June ranged from a high of +6.47% to a low of -5.97%. Year to date, the Parker
FX Index is up +0.71%.|
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 June, the Systematic Index was down -0.76% and the Discretionary Index was down -0.82%. Year to date, the Systematic Index is up +0.64% and the Discretionary Index is up +0.78%. On a risk-adjusted basis, the Parker Systematic Index was down -0.27% in June, and the Parker Discretionary Index was down -0.29%.
The top three performing constituent programs for the month of June, on a reported basis, returned +6.47%, +3.21% and +3.06%, respectively. The top three performers on a risk-adjusted basis returned +2.52%, +1.58% and +1.54%, respectively.
In June, the currency markets saw a broad-based reversal of currencies versus the US Dollar, which declined - 0.66% against a basket of G-6 currencies. Nearly all currencies reversed their year-to-date downward trends against the dollar, largely due to weakness in the USD as traders increased bets that the Federal Reserve will keep interest rates near zero for longer than previously expected. Some of the largest currency moves occurred in European currencies with the Swiss franc gaining 7% versus the US dollar after the Swiss central bank said that the threat of deflation has “practically disappeared,” fueling speculation that the central bank will not continue to constrain the currency.
Another large mover in the month was the British pound, which gained 3.8% relative to the dollar amid optimism that the country’s credit rating and growth will remain stable. Commodity currencies were generally positive in the month with the Australian dollar, New Zealand dollar and Canadian dollar all appreciating relative to the US dollar.
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 294 month compounded annual return since inception (January, 1986 through June, 2010) is up +11.88% on a reported basis and up +3.15% on a riskadjusted basis.
From inception (January, 1986 through June, 2010) the compounded annual return for the Parker Systematic Index and the Parker Discretionary Index, on a reported basis, is +12.09% and +9.77% respectively. From inception, the compounded annualized return, on a risk-adjusted basis, for the Parker Systematic Index and the Parker Discretionary Index, is +2.81% and +3.75%, 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 46 programs that are systematic and 22 programs that are discretionary. The 68 programs manage over $36 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.