Monday, May 27, 2024

Managed futures turn positive for year in strong September

  • Short fixed-income bets turn performance YTD positive in volatile month
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Trend-followers and other CTA strategies posted a strong month of gains in September, turning year-to-date performance positive.

Short bond and long oil positions were key drivers as the market adjusted to higher-for-longer interest rates and the oil price surged.

Societe Generale’s tracker of large trend-followers made 3.8%, putting it up 1.3% for the year, while its broader CTA index was up 3.6%, leaving it up 2%.

London-based Florin Court’s month neatly encapsulated the trend among trend-followers, its flagship up 3.6% and now 1.7% year-to-date.

Stockholm-based Lynx meanwhile made 7.8%, its best month in a year, but remains down 3% so far in 2023.

“Trend following provided valuable diversification for equities and bonds in September, as investors braced themselves for higher interest rates for longer,” reported London-based Winton in a note.

Short bets on fixed-income, Japanese yen and US natural gas positions were responsible for much of last month’s gain. “Most strategies are now either up or broadly flat year-to-date, having recovered losses from March’s fixed income reversal.”

Industry data provider PivotalPath noted in its latest round-up that managed futures managers are even more negatively exposed to a rally in Treasuries today than they were in March.

Quest Partners in New York made 7.5% in its AQO flagship but remains down 9.3% for the year so far.

“A pervasiveness of volatility across all asset classes boosted returns, allowing the strategy to profit in all of the timeframes it trades in,” the firm told investors. “The return of trends and volatility are warmly welcomed in a year that has been challenging for short-term strategies, especially those like AQO that seek to provide robust positive skew.

“The renewed uncertainty around interest rates and inflation seems poised to create further profit opportunities for the remainder of the year and we look forward to the prospect of AQO being able to capitalize on them.”

On future positioning, Winton added: “Trend followers head into the final quarter of 2023 with short positions in fixed income and metals; net long exposure to energies, the US dollar and agricultural commodities; and short or rapidly reducing long positions in stock indices.”