Most commodity trading advisors and trend followers rebounded in September, snapping a multimonth losing streak for many of them. The performance of this group of managers is historically uncorrelated to the broad stock market, although many of them allocate some capital to equities.
The funds entered September anticipating that the U.S. Federal Reserve would cut interest rates. (The Fed did reduce short-term rates by 50 basis points.)
A top performer last month was the Quantedge Global Fund, which climbed more than 8 percent in September and is now up 29.36 percent for the year, according to a private hedge fund database. The systematic quantitative investment strategy is diversified across multiple asset classes such as equities, bonds, commodities, currencies, and insurance-linked securities, according to the fund’s website.
Many other prominent funds posted more-modest increases for the month.
The Mulvaney Global Markets Fund, a systematic long-term trend-following program, gained 3.1 percent in September, its first profitable month in four months. The fund generated its biggest gains from metals and interest rate bets. Mulvaney Global Markets surged 124 percent in the first quarter and is now up 72.66 percent for the year, according to its September monthly report. Year-to-date, soft commodities have accounted for the bulk of the gains.
The fund’s portfolio is made up primarily of agricultural, energy, metal, and financial futures, according to the firm’s website. More specifically, Mulvaney’s managed futures strategy, the Mulvaney Capital Global Diversified Program, invests in metals, energy, crops, livestock, currencies, interest rates, and stock indices.
The DUNN World Monetary & Agriculture Program rose 1.03 percent in September, snapping a five-month losing streak. It is now up 10.46 percent for the year, according to its September monthly report, seen by Institutional Investor. The fund — a one-half leverage version of the WMA strategy — gained 0.55 percent in September and is up 6.06 percent for the year. The WMA strategy’s performance was driven by moderate to small gains in fixed income, metals, currencies, and stocks, more than compensating for moderate to small losses in agriculturals, energies, and volatility, the report says.
Heading into October, Dunn said the “most substantial exposure” in the portfolio continued to be net long fixed income, with Japanese government bonds the lone short position of the sector. Stocks are the next-largest position, “where all markets are directionally aligned,” Dunn added. It also holds moderate-size positions in net long currencies versus the U.S. dollar, net short agriculturals, and net long metals, as well as a small net short position in energy and an even smaller short position in the VIX.
Elsewhere, the Aspect Diversified Fund was up about 1 percent last month, pushing its rise for the year to 11.6 percent, according to the fund’s latest monthly report, seen by II. The fund delivered gains last month from long fixed-income positions thanks to the cuts in key interest rates. “The reduction in the federal funds rate weighed on the U.S. dollar, generating positive performance from the (fund’s) net short exposure,” the report added. “Performance from the stock indices sector was more challenging.”
Aspect noted that “vast stimulus measures” announced by the People’s Bank of China drove Chinese equities to their best week since 2008. But, the sharp moves went against the fund’s short positions in some China-related bourses.
In commodities, Aspect said it was well positioned to take advantage of rising gold prices, which were boosted by declining rates and the weaker U.S. dollar. It suffered losses in its short natural gas position. “Prices rallied due to production difficulties caused by hurricanes in the U.S.,” the fund explained. In agricultural markets, losses were “small but widespread across short positions as supply worries pushed prices higher,” it noted.
One prominent fund that continued to lose money last month was the Tulip Trend Fund. It dropped 2.3 percent in September, cutting its gain for the year to 1.8 percent, according to its monthly report, seen by II. The fund told investors it enjoyed a strong start to the month, driven mainly by positions in rates, currencies, gold and silver, and European and American stocks. Its losses came from short positions in Chinese stocks and a number of commodities, including base metals, U.S. natural gas, grains, soybeans, and sugar.