Flash Report – May 2023

Based on preliminary reporting by more than 1,300 hedge funds and liquid alternative strategies, May turned out to be a tricky month for many strategies. While we do not yet have the full picture of all strategies, we can infer a few conclusions regarding what worked and what did not work in May 2023. Despite flat to positive equity markets many strategies recorded losses.

On the positive side, CTAs seem to have done relatively well and have printed a modestly positive result of 0.5% taking the strategy back to flat returns, and recovering some parts of the March drawdown.

Index	May	April	YTD
Crypto	-6.2%	-0.7%	25%
CTA	0.5%	0.9%	0%
Equity LS	-0.9%	0.2%	1%
Event Driven	-1.9%	0.2%	-2%
Fixed Income	-0.3%	0.3%	1%
Market Neutral	-0.1%	0.1%	1%
Risk Parity	-1.0%	0.2%	4%
Risk Premia	-0.6%	1.0%	1%

We observe modest to negative returns from equity-dependent/adjacent strategies. Event-Driven and Risk Parity strategies suffered the most during a month that was characterized by a positive, but largely range-bound equity market and falling bond prices. [Directional] Crypto strategies had a negative month but are still the best-performing strategy on a year-to-date basis with a result of +25%.

Index	May	April	YTD
CTA Commodities	-0.4%	0.6%	1%
CTA Commodities Disc	-0.8%	0.3%	0%
CTA Disc Macro	0.3%	-0.3%	0%
CTA Discretionary	0.0%	0.2%	1%
CTA Fund of Funds	0.9%	2.1%	1%
CTA Quant	0.4%	0.3%	1%
CTA Short Term	0.8%	0.5%	1%
CTA Systematic	0.6%	1.1%	0%
CTA Systematic Momentum	1.2%	2.0%	-3%

Diving deeper into the CTA sub-sector, we note that Trend Following managers returned 1.2%, taking the YTD result to negative 3%. Commodity managers, where in particular discretionary managers faced difficult conditions, lost 80bp, and are flat for the year.

We would like to draw attention to the diversifying index, the NilssonHedge Quant CTA Index, an index consisting largely of non-trend following strategies. Consisting of more than 140 managers there is ample room to find more niche strategies. Not all of them are crowded nor are they expected to deliver strong performance. But, diversification within the group has created an index that has done well to their larger peers in 2023.

While the daily indices contain a fair amount of noise, we can highlight that CTAs have managed to recover some of the Fixed Income related drawdowns that took place in March. However, the strategy is behind most of the other Liquid Alternative strategies on a year-to-date basis.

To check out how individual strategies did, the NilssonReport offers some quick insights.

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