Strategic Analysis Heating-Up Map - February 2022
In the realm of Hedge Funds and Managed Futures, the month of February 2025 saw a mix of results across various market sectors. Kettera Strategies, a research organization that creates style baskets for analysis and comparison purposes, has provided insights into the performance of programs on the Hydra Platform.
Short-term strategies exhibited a peculiar pattern, with many programs performing well in commodities and fixed income, yet underperforming in the Foreign Exchange (FX) markets. Long equities positions, on the other hand, were generally the biggest detractors to performance for longer-term trend programs.
Commodities prices were driven by persistently rising inflation, global supply chain disruptions, and escalating geopolitical tensions. Those that were directionally long, or long-biased in spreads, fared well as crude oil continued its sharp ascent. Grains and livestock trading was mixed, with directional long, and long-biased, positioning in grains leading to healthy gains due to poor weather in South America tightening soybean supplies and geopolitical turmoil in Ukraine threatening wheat and corn supplies.
In the commodities sector, long metals, grains, and energies positioning were profitable using momentum strategies. Directional metals trading strategies that were long gold performed well, as gold broke out of a long-term choppy range. Silver also broke out to the upside, rewarding long positions. However, spread traders short the front contracts in crude oil and long the back suffered badly, as the front end rallied much more strongly and quickly expanded the spread.
Spread traders did well in the first half of the month in metals, but gave back most if not all gains in the latter part of the month. Conversely, spread and relative value traders in grains did not fare as well.
In fixed income and interest rates, short positions in U.S. and European markets seemed to do well. Foreign exchange trading was flat to negative, with the Australian dollar/USD exchange rate causing setbacks to many programs. Toward month-end, several programs that were short the front contract in wheat while long the back contracts were caught in the beginnings of a record-breaking short squeeze in the front trading months.
The style baskets, drawn by Kettera Strategies, are not investible products or index products being offered to investors. The arrows in the baskets represent the style basket's overall performance for the month.
Discretionary global macro programs were generally positive in February, with strong gains in long precious metals trades and profitable commodities in general. In FX, a strong and sudden reversal mid-month in USD-based exchange rates caused problems for many shorter-term trading systems.
It's important to note that the views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group. For precise information on Kettera Strategies’ commodity trend strategy performance and rationale, it may be necessary to consult their official performance reports or research publications.
The indices and financial benchmarks mentioned in this article are provided for illustrative purposes only and do not reflect the impact of advisory fees. This article is copyrighted by The Sortino Group Ltd and all rights are reserved.
- In the realm of technology-driven investing, such as finance, advancements in algorithms and AI could lead to more sophisticated momentum strategies in the commodities sector, potentially improving the performance of spread traders in future months.
- Given the volatility in the Foreign Exchange (FX) markets, particularly the Australian dollar/USD exchange rate, technology-focused investors might consider the development of machine learning models to predict currency movements more accurately, thereby enhancing the performance of their Hedge Fund or Managed Futures programs.
