Hot Trends Pulse by Kettera Strategies - July 2023 Version
In July, the financial landscape presented a complex mix of factors, with equities, energy markets, and fixed income seeing significant shifts. However, the performance of various hedge fund managers, as reported by Kettera Strategies, remains elusive due to a lack of specific data for Systematic Trend Managers, Quant Macro Managers, Discretionary Macro Managers, FX Specialists, and Commodities Specialists (Metals & Energies) for the month.
The arrows in this article represent the overall performance of the style baskets, with a sideways arrow indicating a largely flat overall performance, a solid red down arrow indicating a largely negative performance, and a green upward arrow signifying a positive performance.
Despite the ambiguity in the data, some trends can be inferred. Systematic Trend Managers faced a notable loss with a long Japanese fixed income position after the Bank of Japan relaxed its yield curve control policy. The returns of FX Specialists varied broadly, but were generally sub-par.
July was a "risk-on" month, with equities and energy markets rallying, fixed income markets falling (yields up), and base and precious metals on the rise. Managers focused on industrial commodities generally performed well, led by positions in natural gas and energy (crude and products).
Quant Macro was a mixed bucket in July, with a slight positive tilt but full of dispersion across markets, sectors, and programs. Discretionary Macro Managers, in contrast, had a positive month overall. The better performers among FX Specialists were those able to pivot more quickly on the USD turnaround.
One consistent theme across most of the profitable programs in Quant Macro was long energy markets. In directional positioning, most of the discretionary programs that were followed captured gains from long global equities positions, long precious metals, and a generally short USD position.
Regarding relative value and spread positions, a common theme among the outperformers was capitalizing on yield curve inversion for Discretionary Macro Managers. Long directional and long-biased spread traders took advantage of a 14%-plus upward move in crude for Commodities Specialists, as well as rising markets in refined products. Long directional and long-biased options positions in gold, silver, and platinum also brought gains for Commodities Specialists.
US inflation and increased oil prices were the main drivers for FX Specialists in July. The month began with a sharply declining US dollar vs. G10 and EM, but strong mid-month GDP releases ignited a rally in the greenback. Overall, systematic trend and quant directional FX traders generally fared poorly, while cross-rate and carry positions appeared to perform slightly better.
It's important to note that style baskets are not investible products or index products; they are meant purely for analysis and comparison purposes. The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group.
- Technology played a significant role in the performance of numerous hedge fund managers, as positions in energy markets, specifically natural gas and crude oil, significantly contributed to the returns of Quant Macro and Commodities Specialists.
- Despite the overall positive performance of equities and energy markets in July, the performance of systematic trend and quant directional FX traders in the technology sector was generally poor, while cross-rate and carry positions appeared to perform slightly better.
