Commodity trading advisers and trend followers posted their first profitable year in 2013 after two straight years in the red — at least, based on the composite indexes.
However, among the individual high-profile funds, results were mixed, with several well-known funds posting sizable losses in 2013. The Newedge Trend Index finished 2013 up 2.67 percent, while the Newedge CTA Index gained 0.72 percent over the same period.
Several firms fared even better than the composite indexes. David Harding’s $24.7 billion Winton Capital Management posted a 9.42 percent gain in its $10 billion flagship Winton Futures Fund. Meanwhile, the London-based firm’s high-flying $650 million Winton Global Equity Fund, a long-only equity strategy, finished the year up 29.77 percent.
Winton’s $220 million Winton Evolution Fund, which the firm describes as a supercharged version of WFF, rose 14.56 percent last year. The fund has 40 percent of its risk in cash equities, versus 25 percent for the Winton Futures Fund, and targets 12 percent volatility, versus 10 percent for WFF.
The firm also manages the Winton Diversified Futures Fund, an onshore U.S. fund that was launched in July 2012. It finished the year up 6.64 percent and now has $300 million under management. The Winton Diversified Strategies Fund, which follows the same strategy and leverage levels as the Winton Evolution Fund, was up 5.87 percent it its first, partial year of trading. It launched in July 2013 and now manages $90 million.
One major reason Winton fared so well in 2013 is that it had a big exposure to the strong global equities market. It did well in both index and individual cash equities.
Baltimore-based Campbell & Co.’s flagship Institutional Managed Futures Portfolio also bucked the industry-wide trend, gaining 12.5 percent last year. The fund’s nontrend strategies were said to have been a significant source of outperformance in 2013, returning almost 8 percent, with only a 20 percent risk allocation within the flagship fund. Within the nontrend portfolio, short-term mean reversion strategies were the most profitable. Trend-following strategies — which have an 80 percent risk allocation within the flagship fund — were also a source of gains, returning 7 percent. Altogether, the flagship’s five most-traded markets in 2013 were the Japanese yen (up 3.1 percent), gold (up 2.8 percent), Nikkei (up 2.6 percent), S&P 500 (up 2.5 percent) and Nasdaq (up 2.5 percent).
However, for some firms, 2013 was a year that couldn’t end soon enough. For example, the BlueCrest BlueTrend fund, managed by London-based BlueCrest Capital Management, lost more than 3 percent in December alone. Its sterling class dropped 11.38 percent for the year, while the U.S. dollar class lost 12.09 percent in 2013.
The Man AHL Diversified fund, operated by London-based fund management giant Man Group, reversed a late-year rally and lost more than 1 percent in December. As a result, the fund failed to return to the black, losing 2.65 percent for the year. This was its third straight year in losing territory and its fourth in the past five years.
Tudor Tensor, managed by Paul Tudor Jones II’s Greenwich, Connecticut–based Tudor Investment Corp., also finished 2013 in the red, dropping 3.36 percent despite gaining 0.78 percent in December. This was the fund’s third straight yearly loss.
London-based Aspect Capital’s Aspect Diversified Program finished the year down 4.46 percent after a flat December. Meanwhile, Cambridge, England–based Cantab Capital Partners’ CCP Quantitative Fund - Aristarchus Program, which had been suffering a nightmare year, nearly reversed its entire late-year rally. The fund lost 6.37 percent in December alone after gaining a total of nearly 7 percent over the prior three months. As a result, the fund finished 2013 down 27.66 percent.
So what went wrong last year for many of these funds? In general, CTAs and trend followers that lost money did not latch onto the surging stock market. Many of them did get off to a great start earlier in the year, riding the bond and interest rate markets. But when those markets abruptly reversed beginning mid-May, many of these funds failed to reverse their bets.
“Every market in the bond and interest rate sector lost money in the first half of the year,” Newedge pointed out in its midyear report.
The second half was more complicated. Gold, which had lost about 29 percent in 2013, enjoyed a midyear rally before sinking again.
In September, October and November, BlueCrest made money in equities and short-term interest rates, for example. However, the complexity of playing the foreign exchange market was underscored by the firm in November, when it fared very well shorting the Japanese yen against the dollar but lost money when it mistakenly went long the Australian dollar versus the U.S. dollar.
