Strategic Heat Map by Kettera - December 2021 Edition
In the recent Kettera Strategies report, the performance of various strategy types within different asset classes was analyzed. Here's a summary of the key trends highlighted:
- Quantitative Macro Strategies:
- These strategies showed solid performance, driven by broad macroeconomic themes and factor exposures.
- Positive contributions came from positions in fixed income and currencies, where macro signals about interest rates and monetary policy shifts were most pronounced.
- Industrial commodities showed mixed results, often influenced by supply chain disruptions and inflation concerns.
- Equities exposure had moderate returns, reflecting cautious risk-taking amid market volatility.
- Systematic Trend Strategies:
- Trend-following strategies experienced a strong performance, particularly in industrial commodities and fixed income.
- Commodities benefited from persistent price trends driven by demand recovery and inflationary pressures.
- Fixed income trends were influenced by changing yield curves and central bank policies.
- Equities and FX trend strategies showed more variable results, with some periods of trend reversals limiting consistent gains.
- FX Strategies:
- FX strategies, particularly those focused on currency carry and momentum, had mixed performance.
- Some currencies benefited from divergent monetary policy expectations and risk sentiment shifts, resulting in profitable trading opportunities.
- Others faced headwinds from volatility spikes and unexpected geopolitical developments.
- Overall, FX strategies contributed positively but with notable episodic drawdowns.
- Shorter-Term Strategies:
- Shorter-term and high-frequency strategies exhibited lower but more stable returns, as they capitalized on intraday and short-lived price inefficiencies.
- These strategies tended to perform well across equities and FX markets, exploiting liquidity and volatility.
- In commodities and fixed income, shorter-term approaches faced challenges due to lower trading volumes and episodic volatility spikes.
Summary:
Kettera’s December 2021 report illustrates that while systematic trend and quantitative macro strategies drove much of the gains in commodities and fixed income through pronounced market trends and macro shifts, FX and shorter-term strategies delivered more mixed but complementary returns, particularly in more liquid and volatile markets like currencies and equities. The industrial commodities and fixed income spaces outperformed equities in trend strategies, reflecting strong macroeconomic narratives at that time.
The report also mentioned several indices such as the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index, the Eurekahedge-Mizuho Multi-Strategy Index, the BarclayHedge Currency Traders Index and BTOP FX Traders Index, the Eurekahedge Long Short Equities Hedge Fund Index, the Barclay Crypto Traders Index, the BarclayHedge Discretionary Traders Index, the Barclay Ag Traders Index, the NilssonHedge Commodities CTA Index, and the Eurekahedge AI Hedge Fund Index.
Additionally, the report discussed the impact of Omicron fears on the markets, with a trend towards bullishness on bonds, betting that central banks would delay tapering and continue easy monetary policies. Crude traders directionally long caught the rally in December, while natural gas traders with short exposure to N. American markets benefitted from downward trending prices due to mild temperatures in N. America.
In the FX sector, long positions in British pounds, certain commodity currencies, and the Nordic currencies - and shorting Japanese yen and some commodity currencies with weaker balance sheets - were common. A blend of BarclayHedge Equity Market Neutral Index with Eurekahedge Equity Mkt Neutral Index was also mentioned. The Societe Generale Trend Index and SG CTA Index were also part of the discussion.
- Investing in systematic trend strategies, particularly in industrial commodities and fixed income, proved beneficial in the recent Kettera Strategies report, due to the strong performance driven by macroeconomic trends and shifts.
- The performance of shorter-term strategies in currencies and equities was more mixed but complementary compared to trend strategies, capitalizing on liquidity and volatility in these markets.
