Kettera Strategies' March 2022 Heat Map Analysis
In the volatile and dynamic landscape of March 2022, various hedge fund strategies demonstrated resilience and adaptability, as outlined in the Kettera Strategies report. The report analysed the performance of systematic trend following, quant global macro, commodity specialists, short-term strategies, and discretionary global macro strategies.
Systematic Trend Following Strategies
The month saw a strong showing for systematic trend following strategies, capitalising on clear trends in various markets. Elevated volatility and persistent macroeconomic trends, such as rising inflation, interest rate hikes, and commodity price surges, provided fertile ground for these strategies to thrive. Markets exhibiting strong momentum, particularly energy and certain currency pairs, benefitted these trend followers.
Quant Global Macro Programs
Quant global macro programs experienced mixed results, with some signals struggling to adapt to heightened regime shifts and increased unpredictability. While some algorithms capitalised on volatility and macro dislocations, the rapid market transitions challenged models calibrated on historical data. Models that could adapt quickly to novel conditions and multiple asset classes made better gains.
Commodity Specialists (Agricultural Markets and Industrial Commodities)
Commodity specialists enjoyed significant profits, particularly in agricultural and industrial commodities. Supply chain disruptions caused by geopolitical tensions, notably the Russia-Ukraine conflict, resulted in sharp supply shortages and price spikes. Weather disruptions and demand surges further pressured commodity prices, reinforcing commodity market strength.
Short-term Strategies
Short-term trading strategies faced volatility but generally performed positively due to active intraday price swings. However, some strategies were challenged by rapid reversals and unpredictable macro news flow. Strategies relying on immediate liquidity and volatility arbitrage capitalised on market noise.
Discretionary Global Macro Strategies
Discretionary global macro managers navigated complex geopolitical and macroeconomic environments. Performance depended strongly on manager insight and ability to interpret evolving fiscal, monetary, and geopolitical signals. Those with flexible mandates and risk management tools performed better amid uncertainty, capturing opportunities across currencies, rates, and commodities.
In summary, the overarching drivers in March 2022 were heightened macro volatility, inflationary pressures, significant geopolitical tensions, and resulting market dislocations. Strategies that could dynamically navigate these factors or capitalise on trending behaviours and commodity price shocks generally benefited, while those reliant on stable regimes or slower model adaptation faced challenges.
The Kettera Strategies report provides further insights, such as the performance of discretionary global macro strategies, which were driven by long petroleum and products positions, short positions in short-term rates and bonds, and long USD versus the JPY and Euro. The wheat market, for instance, experienced unprecedented volatility, with the front contracts in Chicago wheat trading limit up on several consecutive days due to the Ukraine conflict.
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. Kettera Strategies created "style baskets" for research purposes to track category performance on the Hydra Platform. The arrows in the "style baskets" represent their overall performance for the month. The report also includes benchmark sources for performance comparison, such as the Eurekahedge Macro Hedge Fund Index, BarclayHedge Global Macro Index, Société Générale Trend CTA Index, and others.
Industrial Commodities managers were generally profitable, with directional long and long-biased spreads positions in energies and related products performing best. Higher-frequency and short-term programs had positive results across nearly all market sectors, making March one of the best months for short-term trading in years. Quantitative global macro programs were positive overall, with the most profitable themes being short positions in short-term rates and bonds, long USD against the JPY and Euro, and commodities.
It's important to note that indices and financial benchmarks shown are for illustrative purposes only, do not reflect the impact of advisory fees, and may be updated by the index providers. Hypothetical performance results of style baskets have many inherent limitations, and style baskets are not investible products or index products, but are meant for analysis and comparison purposes.
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