Index Update – Nov 22

In terms of average performance, November was a strong month for Equity Risk related strategies. Equity L/S, Risk Parity, (Credit Sensitive) Fixed Income, and Market Neutral all had a strong month. On the flip side, CTA delivered negative results as the trends in currencies reversed. Cryptos have lately flipped from being a risk-on asset to something completely different again.

NilssonHedge provides a set of Hedge Fund performance barometers, ranging from the traditional CTA indices to tracking novel strategies such as Crypto managers. Our indices are transparent and are formed at the beginning of each year, based on managers in the database at that particular point in time.

They are not backfilled and give an indication of the returns from a broad-based basket of Hedge Funds. We are currently producing 12 monthly different indices (including subindices). Following our prior process, we also launched two Market Neutral subindices in 2021, differentiating between discretionary and systematic strategies. In addition, we have five daily indices. You can find more info about the indices here.

With more than 50% of the manager in the database reporting, our main CTA index generated -1.5% for November and has delivered 5.1% YTD. In terms of the man-vs-machine battle, Systematic strategies delivered -1.8% (YTD: 7.1%) while Discretionary traders returned -0.3% (YTD: -1.6%).

We note that there is a strange discrepancy between Discretionary Traders and our commodity-focused index, which mainly consists of Discretionary traders. So, Macro managers, that are focused on discretionary trading in financial assets have likely lagged this year, while managers with a focus on Commodities have done ok, although conditions have been somewhat more difficult as of late.

While there are minor differences in performance between Systematic and Discretionary managers, the outcome is almost the same. In a period that has been dominated by trend-following results, it is easy to forget that CTAs represent a truly diversified asset class.

Noteworthy is also the low correlation between the different subindices. Systematic Managers have a moderate correlation to discretionary managers, but within the Discretionary bucket, there is also plenty of diversification.

This above is based on a representative sample of CTA managers. We claim that our CTA indices are the broadest performance barometers on the markets and offer extraordinary transparency when it comes to capturing the broader returns from Managed Futures managers.

Taking the man-vs-machine battle further, Equity Market Neutral Strategies returned 0.2% for November, and have delivered 0.7% YTD. Systematic EMN strategies returned 0.5% (YTD: 0.7%) while Discretionary traders returned 0.0% (YTD: 0.6%). Given that most of these managers are UCITS managers, we are confident about the returns. EMN strategies are still striving to make a comeback from the difficult conditions in 2019/2020.

To view estimates of current performance, our daily indices provide unique insights (https://nilssonhedge.com/index/daily-indices/). These are a set of daily hedge fund indices, covering CTAs, Market Neutral, Equity Long/Short, Event Driven, and Crypto managers. We typically deliver index estimates on T-1, making them the fastest indicator of hedge fund performance available. These indices help you to form a narrative, understand exposures, benchmark existing managers, and explain performance to clients.