Strategic Heat Map by Kettera - October 2020 Edition
October 2020 was a month marked by significant market volatility due to the ongoing COVID-19 pandemic and shifting economic data. This volatility, in turn, had a broad impact on hedge fund performance.
In this tumultuous environment, quant macro and systematic trend funds seemed to thrive, as they typically benefit from trending markets. The strong directional moves seen during the year, including the rebound rally after the March 2020 crash, provided fertile ground for these strategies.
The BarclayHedge Currency Traders Index and BTOP FX Traders Index, as well as the Eurekahedge-Mizuho Multi-Strategy Index, were among those that saw positive results. However, it's important to note that the views expressed in this article are those of the author and not necessarily those of AlphaWeek or its publisher, The Sortino Group.
On the other hand, equities index markets didn't pose as big a challenge for systematic trend and quant macro programs compared to discretionary managers. Most discretionary managers found themselves on the wrong side of fixed income and precious metals, notably gold, in October.
Ag commodities funds, such as those specialising in grains, often faced headwinds or mixed performance due to supply chain disruptions and weather variability. Ag commodities specialists were, however, October's outperformers, with the majority of experienced grain traders benefitting from long corn and soybean positions.
Metals & energy specialist hedge funds likely saw divergent results. Energy markets were hit hard early in 2020 due to demand shock but had some recovery by the fall. Metals, on the other hand, were influenced by stimulus expectations and industrial demand recovery.
Short-term hedge funds generally faced challenges given the sudden volatility spikes but could profit from tactical trades.
Most systematic trend programs performed slightly negatively in October, largely due to long equities and long U.S fixed income positions. Programs that ended up in positive territory tended to benefit from long European fixed income and various FX (mainly emerging) positions. Kettera Strategies, which follows quant macro programs, had negative returns in October.
The more profitable energy programs in October seemed to exploit either the strong rally in U.S. natural gas or sell-offs in crude and European energy markets. The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index was also mentioned.
A blend of BarclayHedge Equity Market Neutral Index and Eurekahedge Equity Mkt Neutral Index was another index that saw mixed results. The Barclay Crypto Traders Index was also mentioned, reflecting the growing interest in cryptocurrencies among hedge funds.
The Eurekahedge AI Hedge Fund Index was also mentioned, reflecting the increasing use of artificial intelligence in hedge fund strategies. The article is a guest article under the category Hedge Funds - Managed Futures.
In the unpredictable financial landscape of October 2020, data-and-cloud-computing aided quantitative strategies, such as systematic trend funds and quant macro programs, to outperform amidst market volatility caused by the COVID-19 pandemic and shifting economic data. Technology was instrumental in these strategies, as they leveraged trends and directional moves, including the rebound rally after the March 2020 crash, to generate returns.
