Strategic Heating Index - May 2020 Report by Kettera Strategies
In the world of hedge funds, understanding the key factors that drive performance is crucial. According to Kettera Strategies, an investment firm specializing in hedge fund strategies, several factors play a significant role in shaping the success of various hedge fund styles.
Discretionary Macro strategies, which are predicated on manager decisions driven by macroeconomic analysis, geopolitical events, and central bank policies, are heavily influenced by factors such as interest rate movements, fiscal policies, and global economic data.
Quant Macro strategies, on the other hand, rely on systematic models analyzing macroeconomic indicators and price data. Key influences include data quality, model robustness, regime changes, and volatility.
Systematic Trend Programs follow trend-following algorithms that exploit momentum in asset prices. Performance depends on market trending behaviors, volatility regimes, and diversification across asset classes.
Short-Term Strategies focus on capturing short-term market inefficiencies or arbitrage opportunities. Influencers include liquidity, transaction costs, market microstructure, and volatility spikes.
When it comes to Commodities, performance is affected by supply-demand fundamentals, geopolitical risks, weather, inventory levels, and global economic conditions. In the case of Equities, factors such as corporate earnings, valuations, market sentiment, interest rates, and sector rotations play a significant role.
Risk management, adaptive models, and diversification across strategies and markets are critical roles in driving hedge fund performance across these categories, according to Kettera Strategies.
For more detailed, Kettera-specific analysis as of May 2021, direct access to their reports or white papers is needed since such niche, dated, and firm-specific information was not found in the search results provided.
It is essential to note that the indices and other financial benchmarks shown are for illustrative purposes only. Hypothetical performance results of style baskets have many inherent limitations and do not fully account for the impact of financial risk in actual trading.
Moreover, index data is reported as of the date of publication and may be a month-to-date estimate if all underlying components have not yet reported. Style baskets presented are research tools created by Kettera for comparison purposes, not investible products or index products.
In May 2021, Kettera Strategies' Discretionary Macro strategies had returns scattered across the spectrum. Most managers and styles did reasonably well in Equities, with Event driven strategies being the standout. However, strategies with greater commodities exposures did not perform as well.
In the case of Quant Macro programs, they had positive performance in equities and bonds, but losses elsewhere, with currencies being the biggest loser. Systematic Trend Programs had a "give-back" month, with most programs making gains in long equities index positions and short fixed income markets, but surrendering these profits in currency and commodities markets.
Short-Term programs that had an 'intraday to two-day' average trade period performed well, with profits mostly in precious metals, while programs with longer holding periods did less well. Many ag spread programs did well, while energy traders focused on crude oil faced challenges, but nat gas traders, especially in European NG markets, did much better in Commodities.
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.
Investing in various hedge fund strategies, such as Discretionary Macro, Quant Macro, Systematic Trend Programs, and Short-Term Strategies, requires an understanding of factors that affect performance in finance. For instance, interest rate movements, fiscal policies, and global economic data significantly impact Discretionary Macro strategies, while data quality, model robustness, and volatility are key considerations for Quant Macro strategies. On the other hand, market trending behaviors, volatility regimes, and diversification across asset classes are critical for Systematic Trend Programs, and liquidity, transaction costs, and volatility spikes play significant roles in Short-Term Strategies. Additionally, performance in Commodities is influenced by supply-demand fundamentals, geopolitical risks, and global economic conditions, while factors such as corporate earnings, valuations, market sentiment, interest rates, and sector rotations have a significant impact on Equities.
