The badly beaten-down commodity trading advisers, trend followers and other systematic funds — those that use computers to make investments — are starting to gain a bit of momentum.
After several years of lousy performance and losses, several such funds are solidly in positive territory for the year to date, while others have put together a string of monthly gains. In fact, the average managed-futures fund has posted a profit in each of the past three months, according to Atlanta-based data tracker eVestment.
“CTAs have now almost made up their YTD losses,” states the most recent monthly report from Lyxor Asset Management, a subsidiary of Paris-based investment banking conglomerate Société Générale Group.
So what is fueling this recent turnaround? Lyxor says in its analysis that long-held positions in equities and more recently in bonds have started to pay off since May.
Through June 27, Bermuda-based Tewksbury Capital Management’s Tewksbury Investment Fund gained 8.48 percent, while London-based Man Group’s Man AHL Diversified fund returned 8 percent. AHL Diversified is hoping to snap a three-year losing streak.
London-based BlueCrest Capital Management’s BlueTrend fund rose about 1.9 percent in June through June 20. As a result, its U.S. dollar shares are up 5.42 percent for the year.
The Capital Fund-Discus Composite Program, managed out of Paris-based Capital Fund Management, gained 2.02 percent in June, its third straight profitable month after starting the year with three straight monthly losses. As a result, it is up 2.47 percent for the first half of the year. And although David Harding’s Winton Futures Fund, managed by London-based Winton Capital Management, lost 0.58 percent in June, it gained 1.38 percent in the second quarter and 1.24 percent for the first six months of the year.
Several other high-profile CTAs are still down for the first half of the year but have staged rallies in recent months. The Aspect Diversified Program, managed by London-based Aspect Capital, has staged the most significant turnaround. It jumped 1.73 percent in June, its third straight profitable month, cutting its loss for the year to just 0.13 percent. The fund lost money in each of the two previous years.
The CCP Quantitative Fund - Aristarchus Program, managed by Cambridge, UK–based Cantab Capital Partners, gained 2.45 percent in June — its second straight profitable month — cutting its loss for the year to 2.33 percent. The fund lost 27.65 percent last year after being up for each of the three previous years.
One of the best performances in the second quarter came from a small, relatively new fund. The $140 million Secor Alpha Fund surged 13.19 percent in the three-month period after posting gains of 7.3 percent in May and 1.7 percent in June. As a result, it is up 5.39 percent for the year.
The fund is headed by Raymond Iwanowski, a managing principal and chief investment officer of Secor Asset Management, who was previously co-CIO of the Quantitative Investment Strategies group at Goldman Sachs Asset Management.
In June, gains were led by equities as well as long U.S. and European Union positions in the yield curve. “Rising oil prices on growing concerns in Iraq also contributed positively,” Lyxor adds in its report. On the other hand, the biggest detractors to performance among funds with long-term models were short positions in base and precious metals, the firm notes.
Peter Laurelli, director of research at eVestment, says the positive returns from managed-futures strategies are coming from the segments where there have been reversals in the past few months. For example, he points to a strong rebound in precious metals, Japan equities and some emerging markets, such as India and Brazil. During this period, markets that had been going up — such as corn, wheat and “soft” commodities — reversed direction.
In its May report, the most recent it has published, BlueCrest’s BlueTrend points out that it made money from four of the seven markets it trades. “The bond sector was most notable in contributing very strongly to performance, with the equities sector also adding to gains,” the report states. The three main commodities markets it trades slightly detracted from performance, it added. The fund lost 11.38 percent in 2013.
One major fund that appears to be moving in the opposite direction is the Quantitative Investment Management Global Program, which lost 0.13 percent last month, its fourth straight monthly loss after beginning the year with two months of gains. As a result, it is down 6.35 percent for the year. The fund is managed by Charlottesville, Virginia–based Quantitative Investment Management.
However, this fund is used to marching to the beat of its own market sentiment. Last year it lost less than 1 percent after making money the two prior years. And its worst losing year since its 2003 inception was 2010, when it fell just 3.08 percent.
