What's Working In Tactical Asset Allocation Strategies
Sneak peek at January 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.
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Breakdown of January Hedge Fund Returns
Kettera Strategies Hedge Fund Platform Key Insights
#1 Short-term and higher-frequency programs seemed to indicate that December was just a momentary aberration, as nearly all diversified short-term programs we follow were positive in January. Most “single sector” (e.g. equities or FX only) strategies were also positive. Increased volatility seems to be paying off for these managers.
#2 The theme in global macro appeared to continue in January, as discretionary macro programs once again outperformed, as the leading performers caught the rallies in gold and US treasuries, as well as the correction in industrial metals. Most of the quant macro programs we follow ended flat to down, the most prevalent culprits being wrong picks on the non-US fixed income markets.
#3 AI and machine learning-based enjoyed a profitable run in January, although this is a very generalized statement as there are so many different types of these approaches - in different markets. We can say that the most profitable AI-driven managed futures program on our platform generated almost all profits from G10 fixed income markets.
#4 Systematic trend programs appeared to have a very good month. The more profitable programs were generally long the European and North American fixed income and short-term interest rate markets. Metals commodities markets and equities indices posed some challenges, but losing trades in these sectors appeared to be brief and minimal.
#5 In the equities strategies, we can generally state that most long-short managers posted negative returns on the month, largely due to equity market disruptions. This was also somewhat true for many of the event driven strategies we track, but to a lesser extent. The equities market neutral programs we follow, in contrast, seemed to generate more positive results.
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.
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)