Mon, Mar 19, 2018
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Index Tracker: Analysis of managed futures and global macro returns.

Tuesday, August 11, 2009

Beyond the Numbers

For hedge funds as a whole, this year’s story has been one of coming back from the losses of 2008. The top performer to date is convertible arbitrage, returning about 24% according to Credit Suisse/Tremont. Convertible arbitrage, of course, made a substantial loss in 2008.

By contrast, the two groups that were the stars of 2008, managed futures and short sellers, are the losers of 2009. Managed futures was in the red 7.4% through June. The strategy has been disappointing this year because trend followers could not replicate their ’08 success, says Credit Suisse Tremont Index LLC director Philippe Schenk.


Credit Suisse/Tremont indexes, as of June

                                                                                    June                 YTD

Hedge Fund Index                                                        0.43%             7.18%

Global Macro                                                               -0.85%            3.40%

Managed Futures                                                          -2.32%            -7.43%


What’s happened in July? Less than half of the participants in any one index had reported their July numbers as of the first week of August. OFI editorial advisor Tim Merryman – in his day job, managing director at Interconti Ltd., futures industry consultants – calculated a preliminary return for July.

Given the partial reporting, Tim looked to get a more comprehensive view by adding together several CTA indexes, including BarclayHedge and Autumn Gold. On the basis of that calculation, the year-to-date through July CTA loss comes to a relatively modest -1.78%.

A Credit Suisse/Tremont report points out that some diversified managed futures programs offset losses from trend following with gains from discretionary approaches. Here is the commentary:

Managed futures and systematic strategies struggled during a challenging June, as markets generally lacked direction in the month. Trading was characterized by erratic price movements and trend reversals across all time frames. The performance of trend followers was dominated by losses from energy, equities, and currencies. High-frequency managers suffered from sharp reversals and volatile but range-bound markets. Some multi-strategy managers were an exception, as losses from trend-following and high-frequency models were offset by gains from discretionary and behavioral models that allocate to futures and equities. Specialist systematic FX managers posted negative returns, with losses in a reversal of the Canadian dollar against the US dollar being the largest contributor to performance.

Global macro had a small loss in 2008 and has a small gain in 2009 to-date. In June global macro managers posted their first negative monthly performance since October 2008.

They were affected adversely by the sell-off of short rates in US Treasuries, says the Credit Suisse/Tremont report. More generally, “As the macroeconomic stabilization broadly continued, the sideways moves of many markets limited the number of directional trading opportunities, resulting in muted performance.”

Tim offers a portfolio diversification perspective. “Wasn’t the push into managed futures about hedging overall portfolio risk?” he asks, going beyond the numbers. His point is that when one engages in true hedging, one must expect lower overall volatility and along with it slightly smaller portfolio gains, in return for smaller losses in bad years.

For a simple demonstration, take a portfolio mix of 20% managed futures and 80% stocks. Say stocks are represented by the robustly-performing Russell 2000 Index (up 14.4% to date). Using the estimated CTA return as of July, Tim points out that this portfolio made about 11.2%. Small price to pay for the peace of mind it brings, he suggests.

This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Hedge funds amass big bets against world's leading advertisers, Investor Elliott Management buys tiny stake in Wipro[more]

    Hedge funds amass big bets against world's leading advertisers From Hedge funds have amassed bearish bets of more than $3bn against the world's largest advertising companies in an attempt to profit as the industry undergoes ongoing wrenching disruption and slowing growth. Funds i

  2. News Briefs - Investcorp to launch a $100 million PE fund for Omani pension funds[more]

    Bahrain-based investment firm Investcorp will soon launch a $100 million fund dedicated to Oman's Pension Funds as part of its investment plan. 'The Opportunities Fund' will be focused on private equity investments in the U.S. and Europe and will target mid-sized companies across a broad range of se

  3. DoubleLine's Gundlach sees U.S. 10-year Treasury yield rising, weighing on stocks[more]

    From Reuters/ Jeffrey Gundlach, the chief executive of DoubleLine Capital and known on Wall Street as the "Bond King," said on Tuesday the yield on the U.S. 10-year Treasury note will likely move higher and pressure riskier assets including equities and junk bonds. Gundlach, on an

  4. SEC charges Theranos CEO Holmes with fraud[more]

    Bailey McCann, Opalesque New York: The SEC has charged Elizabeth Holmes, founder and CEO of Theranos and its former President Ramesh "Sunny" Balwani with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about t

  5. Institutional Investors - Overdrawn pension fund scores gains[more]

    From Investments in big banks, pawn shops and rolling papers helped boost public safety workers' underfunded pensions this past calendar years, according to newly released figures. After recording middling returns in recent years, the Police & Fire Pension Fund (P&F) notched