What's Working In Tactical Asset Allocation Strategies
Sneak peek at December hedge fund and managed futures returns from Kettera Hydra Platform Investor Letter.
Kettera Hydra platform gives qualified investors the ability to access top-tier fully vetted macro, managed futures, FX and hedge fund managers at lower investment minimums and the same fee structure as direct managed accounts.
The platform separates the "wheat from the chaff" and only lists best-in-class managers. Kettera conducts rigorous due diligence on each manager before a manager is approved on the platform.
Breakdown of November Hedge Fund Returns
Kettera Strategies Hedge Fund Platform Key Insights
Key Insights:
#1 The generally positive returns for discretionary global macro programs over the last few months continued, and then some, with discretionary managers leading the macro/managed futures sector in December. Quant macro programs generally performed positively, but not as well as discretionary. Setbacks for the quants stemmed once again primarily from the G10 currencies, although fixed income – unlike last month – was a big contributor to the underperformance.
#2 In contrast to November, the short-term and higher-frequency programs we follow seemed to generally struggle during the month. No huge drawdowns, but moderately negative returns across the board.
#3 The options- and volatility-based programs appeared to continue a profitable run, although not as stellar as last month’s. (We note, again, that the strategies Kettera follows in this bucket are almost entirely either volatility spreads or “long vol” programs.)
#4 Trend following strategies were down on the month, with currencies driving losses. The USD declined versus most other G10 currencies, notably the GBP and the Euro, reversing a trend. [generally, because of Phase I and Conservatives winning a decisive victory in the U.K., there was large shift from Risk-Off to Risk-On. Bonds sold off, EM currencies and the BP-Euro rallied vs. USD, equities rallied, gold rallied, and Crude rallied after OPEC agreed to cut production].
#5 In the equities L/S world, long market exposure and general pro-growth biases of most strategies in this space proved to be beneficial in December. Short positions in interest rate sensitive sectors (e.g. financials) tended to hurt performance.
Disclosure Notes:
The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, neither Kettera nor the author make any representation or warranty, express or implied, as to the information's accuracy or completeness, nor do Kettera or the author recommend that the attached information serve as the basis of any investment decision. This is provided to you solely for informational purposes only and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.
For the “style classes” and “baskets” presented in this letter: The “average” referred to above is an average of two inputs: (i) performance of a “style basket” created by Kettera for research purposes to track the category and (ii) the third-party benchmark for that category. The “style basket” for a class is crated from monthly returns (net of fees) of programs that are either: (1) currently listed programs on Hydra, (2) programs that have been de-listed or terminated from Hydra (for a holdover period of 12 months), or (3) programs currently under review by Hydra with an expectation of being on-boarded. The weighting of a program depends upon which of these three groups the program falls into; programs of a common group are equally weighted (and not volatility adjusted). These baskets are not investment products or index products being offered to investors. They are meant purely for analysis and comparison purposes, so the reader can gain a greater understanding of a style class. These also were not created to stimulate interest in any underlying or associated program.
Nonetheless, as these research tools may be regarded to be “hypothetical” combinations of managers, please read the following warning: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY PRODUCT OR ACCOUNT WILL ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Benchmark sources:
1-The Hedge Fund Intelligence Global Macro Index and HFI Currency Index can be found at: https://data.hfm.global/
2-The Societe Generale Trend Index and SG CTA Index can be found at: https://cib.societegenerale.
3-The Societe General Short-term Traders Index: (same link as above)
4-The EurekaHedge AI Hedge Fund Index
5-The BarclayHedge Currency Traders Index and BTOP FX Traders Index can be found at: http://www.barclayhedge.com/
6- S&P GSCI Metals & Energy Index and S&P GSCI Ag Commodities Index can be found at: https://us.spindices.com/
7-The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index can be found at: http://www.eurekahedge.com/
8-The Eurekahedge-Mizuho Multi-Strategy Index: (See above)
9-The Eurekahedge Long Short Equities Hedge Fund Index: (See above)
10-BarclayHedge Equity Market Neutral Index: http://www.barclayhedge.com/
11- The Eurekahedge Market Neutral Hedge Fund Index: (See above)