Tuesday, August 2, 2016

Managed futures performance - a month of consolidation

Managed futures as measured by the SG index posted a flat month, up 19 basis points. This was against good performance in bonds and strong positive equity gains. Commodities turned lower for the second month in a  row. 

While not always shown statistically, we observe that after a strong event there will be a reversal or flattening of performance with trend-followers. When uncertainty is resolved, markets will reverse. Additionally, switch from risk-off to risk-on will lead to better equity performance which will not always translate to diversified managed futures. This switching will not show-up when splicing data into calendar months. 

Year to date returns are now fairly clustered with the outlier being the strong long bond performance. Naturally, many will have the view that just holding bonds as a diversifying assets is all that is needed in a portfolio, better returns and non-correlation. Nevertheless, even with the cluster of performance, the foundation of holding a hedge fund style that is well-diversified and looks for trends is a good way of generating unique returns even if in the short-run the end result is the same.

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