Strategic Heat Map by Kettera - March 2021 Edition

Strategic Heat Map by Kettera - March 2021 Edition

In March 2021, the financial landscape presented unexpected inflection points, particularly in fixed income and softs commodities. Systematic CTAs, known for their momentum and trend-following strategies, faced headwinds, while FX specialists demonstrated resilience, driven by the volatility and trends in fixed income and currency markets.

The EurekaHedge AI Hedge Fund Index and the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index, among others, provide a broader context for these performance trends. The common themes for these programs were gains in equities and commodities, with fixed income being the most challenging sector.

Fixed income and currencies were the primary drivers of gains for FX specialists during this period. On the other hand, systematic CTAs struggled amid mixed market signals, especially as equity markets moved sideways or experienced volatility counter to trends. This contrast is attributable to the different underlying exposures and model sensitivities. Systematic CTAs often rely on equity and commodity trends, while FX specialists benefited from pronounced currency and fixed income moves.

Exact numeric performance figures for March 2021 are not readily available, but the broader context suggests that FX specialists capitalised on the volatility and trends in fixed income and currency markets, while systematic CTAs found fewer persistent trends, particularly in equities, leading to less favourable results.

In the equity markets, idiosyncratic factors rolled through, hurting event-driven specialists that had previously benefited from the tech sector. Conversely, most programs tracked by Kettera Strategies ended the month positive.

In commodities strategies, energy traders were generally positioned long in anticipation of increased demand from diminishing pandemic restrictions, but oil sold off throughout the month. Metals traders faced choppy base and precious markets, as copper's rally finally stalled, and silver sold off.

The SPAC market cooled off considerably over the month, driving a good deal of dispersion among the managers followed in this space. In commodities indices, the S&P GSCI Metals & Energy Index and S&P GSCI Ag Commodities Index offer illustrative insights, albeit unmanaged and without reflecting advisory fees.

Trend followers that were nimble enough to catch the unanticipated strength in the USD enjoyed a strong month in currencies. Most FX specialists tracked by Kettera performed well, with a long USD stance during the month being a winning position, particularly against the major G10 units.

In agricultural specialists, most of the grain trading programs held bullish views in corn and soybeans. The Barclay Crypto Traders Index, the Eurekahedge Long Short Equities Hedge Fund Index, a blend of BarclayHedge Equity Market Neutral Index with Eurekahedge Equity Mkt Neutral Index, the BarclayHedge Currency Traders Index, and the BTOP FX Traders Index also provide valuable insights into the performance trends in March 2021.

It is important to note that indices and other financial benchmarks shown are for illustrative purposes only, do not reflect the impact of advisory fees, and may be updated from time to time. Kettera disclaims any obligation to verify these numbers or to update or revise the performance numbers. All rights are reserved, and no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency or other Reprographic Rights Organisation, without the written permission of the publisher.

For more information about reprints from AlphaWeek, click here. Hedge Funds Guest Articles and Hedge Funds - Managed Futures are properties of The Sortino Group Ltd.

1. Amidst the volatile fixed income and currency markets in March 2021, FX specialists leveraged technology-driven strategies to capitalize on the pronounced currency and fixed income moves, subsequently outperforming Systematic CTAs that primarily rely on equity and commodity trends for their performance.
2. As the SPAC market cooled off, trend followers in currencies who were nimble enough to catch the unanticipated strength in the USD enjoyed a strong month, underscoring the importance of technological adaptability in navigating the complexities of the financial landscape.

Read also: