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Half Year Index Review

Summer is setting in across most markets and we see relatively small moves across our strategy indices. Most of them are showing positive numbers for the year, with the minor exception of Event Driven strategies that are struggling to deliver positive results. Volatility has been relatively low and perhaps a hindrance to the more dynamic strategies. Together with sector and style shifts in equity markets, the first half of the year was somewhat mediocre for the average Hedge Fund.

NH Main Strategy Indices (Ex Crypto)

Risk Parity, which is nowadays a traditional asset allocation strategy, has enjoyed an upward drift in equity markets and less catastrophic bond performance. The volatility overhang from last year is still reducing position sizes for most risk-managed strategies.

Long/Short Equity has continued to benefit from the explicit (yes, not implicit) beta component but has, on average, struggled to deliver the expected 0.5 x Major Equity indices. With the US Equity Market up ~15%, seeing 3% for ELS is underwhelming. They may have partially preserved capital better last year, but the upcapture on a year-to-date basis has been on the low side.

In 2023, Technology stocks have been a tear. Here the performance of $ARKK with a performance of 44% YTD is a good illustration of the recovery. Like Crypto strategies, it has a large drawdown to recover from 2022. The rapid shifts in styles and sectors have not made it easy to be a long/short equity strategy.

Event Driven has failed to produce any spectacular performance as of late, as deal flows have been rather unremarkable, seeing a decline last year and a weak start to 2023.

Crypto strategies experienced some remarkable fireworks in January but have thereafter been a tad boring. We noted earlier that the dispersion of the managers is now at all-time lows.

And finally, what you have been waiting for, CTAs have done a remarkable job of recovering the March Fixed Income related drawdown. Our main CTA index is now back to positive (+0.7% for 2023). That does, however, hide a lot of dispersion between managers, but most styles have delivered about the same numbers. Momentum-based (aka Trend Followers) strategies are still down for the year whereas option strategies have done nicely for the year.

CTAs have done a number of position changes, but are still “short-ish” in Fixed Income despite the bear-market rally in March. Otherwise, we note a switch to long positions in Copper, Equities, and in the Euro, short in Crude Oil, and whipsaws in Gold.

The J8 CTA index gives an indication of positions and changes for a concentrated strategy

With that, we hope that the second half of the year will present better trading opportunities.

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