As equities continue to climb to new highs, commodity trading advisors (CTAs), the computer-driven hedge funds that try to spot trends in various markets around the world, posted another large round of losses in October.
This is a group that aims to have little or no correlation to the stock market. When equities are in a bear market, they tend to shine, most notably during the 2008 financial crisis. But although they got off to a great start this year even as stocks were rising, most have since experienced a multimonth meltdown.
As a result, at least one of them has now fallen into the red.
The Tulip Trend Fund lost 8.7 percent in October and was down 7.1 percent for the year through the first ten months of the year, according to the firm’s monthly report, seen by Institutional Investor. The fund was up more than 46 percent through April.
Tulip said in its report last month that it suffered its largest losses from currencies and interest rates, explaining that the Federal Reserve’s trend reversal caused losses on long positions in U.S. interest rate instruments and on shorts on the U.S. dollar.
In Europe, Tulip noted that trend reversals caused losses on shorts in Euro-zone interest rate instruments and longs on the British pound. These losses were partially offset by profits from short Japanese yen and Korean won positions. In equities, Tulip said it lost more from longs than it gained from shorts.
Elsewhere, the DUNN World Monetary & Agriculture Program came close to falling into the red, reporting an 8.92 percent loss for the month. As a result, it was up just 0.61 percent for the year through October, according to its monthly report, seen by II.
The firm’s World Monetary & Agriculture Institutional Program — a one-half leverage version of the WMA strategy — lost 4.54 percent last month and is up just 1.25 percent for the year. In October, the funds suffered moderate losses in fixed income, stocks, and currencies and a small loss in energies, the report says. These losses outweighed small gains from agriculture and metals.
Heading into November, DUNN told clients long stocks were “the most substantial exposure” in the portfolio, “where all markets remain directionally aligned.” It noted that net short agriculturals and net long metals were tied for second with “moderately sized positions.” Small positions are held in net short currencies against the U.S. dollar, net short energies, and net long fixed income.
Elsewhere, the Quantedge Global Fund lost more than 11 percent last month and is up 17.88 percent for the year, according to a hedge fund database. The Aspect Diversified Fund was down about 6.6 percent in October but up 4.86 percent for the year, per the hedge fund database. MAN AHL Diversified is down 5.46 percent for the year, the database says.
The Mulvaney Capital Global Diversified Program remains the top performer for the year, up 51.51 percent even after losing 12.25 percent in October, according to its monthly report, seen by II. It had been up 124 percent in the first quarter.
Mulvaney’s losses in October were driven by bets on currencies and, to a lesser degree, interest rates, according to the report. Year-to-date, soft commodities contributed more than 143 percent to gains, but they were offset by currencies and rates, each detracting more than 13 percentage points, and to a lesser degree livestock and energy.