So much for 2014’s big rally.
After a generally big year in 2014, commodity trading advisers (CTAs) and other computer-driven hedge funds are having a tough time navigating this year’s volatility, where shifts in trends and directions of markets are occurring frequently and without warning.
These developments have put many of the computer-oriented funds back in the red or heavily cut into their earlier gains.
Bank of America Merrill Lynch pointed out in a new report on Monday that while its diversified hedge fund index is down 0.5 percent through June 10 versus a slight decline of 0.1 percent for the Standard & Poor’s 500, CTAs are down 0.8 percent for the year after dropping 1.8 percent in the most recent week alone.
The Lyxor CTA Broad Index lost 2.2 percent in the past week alone and is now down 3.9 percent for the month. For the year it fell 2.6 percent.
CTAs were hammered in the past week by the global sell-off in stocks and the abrupt rise in the euro versus the U.S. dollar, according to a weekly report from the Lyxor Managed Account Platform. Lyxor stresses that the short position in the euro among CTAs has been sizable.
The June struggles come after managed-futures funds posted two straight losing months, declining 0.23 percent in May, according to industry tracker eVestment.
Until then, the strategy was on a five-month winning streak, gaining nearly 6 percent during that period, reports eVestment.
According to eVestment’s May report, CTAs have been hurt by major trends that changed direction — notably, the strengthening dollar and declining oil prices.
Drilling down, the data collector found that in May large managed-futures strategies outperformed smaller competitors but only slightly. “This is a reversal of the breakdown of April’s declines, where large managed futures funds produced much larger losses,” eVestment added. “However, they also produced much higher gains when the currency and commodity price trends were at their strongest.”
Among specific funds, the BlueCrest BlueTrend fund lost 3.32 percent in April, 2.2 percent in May and nearly 3 percent in the first week of June alone. As a result, the London-based fund is now up 1.51 percent for the year, according to fund documents.
In its April report, the most recent available, the fund, managed now by Leda Braga’s Systematica Investments, noted that the month started off well. But foreshadowing the subsequent six weeks or so, it noted that it suffered losses late in April after the U.S. dollar reversed and started to weaken, and rising interest rates hit fixed-income markets, especially the German ten-year Bund.
Baltimore-based Campbell & Co.’s Managed Futures Program lost 0.9 percent in May, trimming its gain for the year to 2.6 percent. The $4.8 billion flagship portfolio devotes 80 percent of its assets to trend-following strategies and 20 percent to nontrend strategies.
The fund had trouble in the first half of May and rebounded “strongly” in the second, according to its May report. “As in April, trend following strategies were negative while non-trend following strategies were approximately flat overall,” the report added.
Fixed income was the biggest loser in May. “The violent sell off in early May saw longer-term yields rise to new highs for 2015 due to a combination of factors including the recent ECB announcement and continued divergence in growth expectations, as well as technical factors such as a supply glut and investor positioning,” Campbell explained in the report. Campbell was especially hurt as Bund yields surged some 70 basis points in just two weeks, “the largest two-week drop in Bund contract history,” according to the report. “This outsized move led to losses for a long position in the contract, which was the biggest loser for the portfolio in May.”
In the commodity sector, Campbell enjoyed gains in grains, thanks to short positions in corn and soybeans, while suffering losses in precious and industrial metals.
Campbell also made money from net long positions in the U.S. dollar, the firm’s best-performing sector. It also made money from equities.
Elsewhere, David Harding’s London-based Winton Futures Fund fell 3.2 percent this month through June 10 and is now off 2 percent for the year.
Man Group’s AHL Diversified lost 1.31 percent in the first week of June alone, putting the London fund into the red for the year. AHL Diversified is down 0.3 percent year to date after surging 32 percent last year.
The CCP Quantitative Fund-Aristarchus program, managed by Cambridge, UK–based Cantab Capital Partners, lost 0.5 percent in May after plummeting 9 percent in April. The program rose 13.4 percent in January alone and 39.32 percent last year after losing 27.65 percent in 2013.
Cantab was founded in 2006 by Ewan Kirk and Erich Schlaikjer. Kirk, who was named an Institutional Investor Rising Hedge Fund Star in 2009, ran Goldman Sachs’ quantitative strategies group in Europe and was responsible for all of the firm’s quantitative technology.
One fund that has bucked the recent trend is Mulvaney Capital Management’s Global Diversified Program *QEP*, which rose 4.13 percent in May after losing 8 percent in April. It is up 5.86 percent for the year. Last year it surged 67.35 percent after rising 43.11 percent in 2013, when most CTAs lost money.
