Frosty Conditions – Best’n’Worst Nov 22

Conditions for the high-flying CTAs turned considerably more difficult in November. Several of the highest-performing CTAs suffered from drawdowns, resulting in slightly less stellar returns for 2022. Non-trend-following CTAs did better in a month where the USD rallied. The rally in risky assets probably saved a lot of managers as they are now only having a marginal down year, rather than a significant one.

Based on the latest available return data, we can present the best and worst strategies per category, both on a monthly and on yearly basis. This is calculated from our proprietary composite data streams but may contain errors. These are not filtered for Asset Under Management and are ranked on a simple return metric without adjusting for volatility. We only rank funds that have reported returns for the current reporting month.

CTA

While the general CTA tends to be trend-driven, most of the outliers are driven by specific markets or market effects. The dispersion for the best/worst funds is high, but you may learn something about how they and correlated strategies react to different market developments. To the see full CTA list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/cta-rankings/

Regardless of the recent giveback, CTAs are still kings of the hill and unless something cataclysmic happens in the last few days of 2022, it is likely to a year that strengthened teh arguements for adding such managers to a diversified portfolio.

Market Neutral

Market Neutral is one of the least volatile strategies, where returns tend to accumulate over time, rather than printing lumpy returns on the upside or downside. Factor performance tends to dominate the average performance, but specific funds can be exposed to specific strategies that are not captured by academic factors. To explore our extensive Market Neutral list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/market-neutral-rankings/

While a modest momentum crash took place lately, market neutral have done well without any significant exposure to markets.

Equity Long/Short

Approximately half of the returns for Equity Long/Short strategies are driven by the underlying equity markets. November 2022 was a good month for equity long/short strategies capturing a part of the market rally.

Performance for the best and worst managers is typically driven by idiosyncratic security-specific situations. To explore our extensive Equity Long/Short list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/equity-long-short-rankings/

Event Driven

Event-Driven managers are commonly exposed to various arbitrage/spread risks related to specialist situations securities. In a year with deal-flows relatively modest, increasing funding costs, and market volatility Event Driven strategies have generally underperformed. A strategy that is not highly correlated with Equity Markets, but yet dependent on them.

Managers with concentrated exposure tend to end up on this list and exploring the drivers of out or underperformance may yield insights. To explore our extensive Event-Driven list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/event-driven-rankings/

Fixed Income

Like Equity Long/Short managers, Fixed Income managers are usually driven by the underlying market conditions. Fixed Income strategies has disapointed throughout 2022. Next year might bring better performance as spread are wider and yields are higher.

For this list, we typically find managers that are sensitive to a specific subsector, and especially managers that are engaged in the lowest part of the capital structure. To explore our extensive Fixed Income list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/fixed-income-rankings/

Risk Premia

Risk Premia managers are commonly implemented well explored and researched systematic strategies. These may be viewed as a general proxy for Hedge Fund exposure. Performance of specific factors may reveal differences and similarities to your own portfolio. To explore our extensive Risk Premia list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/risk-premia-rankings/

Crypto

As usual Crypto traders are the wildest bunch on the street. Returns tend to be double-digit (or even triple-digit for the best funds), simply due to the volatility of the asset class. Crypto managers continued to shut down and most of the managers that are doing well are arb strategies with no exposure to the prime brokers that had issues with FTX. We have seen several strategies creating sidepockets for their FTX exposures.

To explore our extensive Crypto Strategy list, with dynamic rankings, please see https://nilssonhedge.com/reports/nilsson-report/crypto-strategy-rankings/

Past performance is not indicative of future results.