The managed futures and global macro strategies are usually a testimony to the power of broad diversification. These strategies will do well when there is a major dislocation in either stocks or bonds given they may be some of the most diversified strategies in the hedge fund space.
A review of equities, bonds, and managed futures, finds that managed futures has been the laggard for the year. Fixed income has been flat for most of the year with a gain of just over 1 percent. Equities have been on a 3-month roller coaster with October performance offsetting most of the losses in August and September. Managed futures has moved sideways for the last three months as fixed income opportunities have been limited and the quick reversals for equities have been harder to capture in a manner that will drive positive returns.
Managed futures proved to be a good positive diversified for the first quarter and served as an equity dampener during the summer, but it has not been a strong return enhancer. With global growth expected to further weaken, differences in monetary policy, and the potential for equity markets to move closer to fundamentals, the next few months may prove to be a better performance period. At this point, managed futures needs to show that it can not only diversify but also achieve positive returns.
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