Dispersion – Style Matters

We like Dispersion, it tells us if an environment is a suitable environment for the strategy, or if you need to be skilled to pick funds or allocate to specific systems and portfolio managers.

In the current environment we are seeing lower manager dispersion, and picking the right style is more important than selecting the best manager within a group. This can of course change rapidly, if positions and markets start to diverge.

There are a few interesting observations, which is largely reflective of the May-23 trading environment.

• Crypto Managers are trading within a tight range, one of the tightest dispersion on record. While this is generally the most volatile strategy class, we are two standard deviations below the mean, in terms of Dispersion. This is an environment where a variety of strategies largely behave the same.
• Crypto Manager dispersion is almost on par with traditional Liquid Alternatives. We have also observed lower and lower volatility across Crypto Strategies.
• Event Driven and Risk Premia, are two strategies that are exhibiting slightly elevated levels of Dispersion. These two strategies had negative results during May-23.
• CTAs are still slightly below average dispersion, but have recently started to build positions and we see dispersion increasing slightly.

CTAs are back to positive numbers, on average. But as usual, the average hides a lot of dispersion. Trend following is still negative, on average, and is the strategy group that has struggled to generate positive results year-to-date. Most other strategies are slightly positive for the year.

Looking on a year-to-date basis, you probably made money as a Hedge Fund allocator. Event Driven, is one of the few hedge fund strategies that are struggling.

You can follow continously updated Dispersion statistics here.