Kettera Strategies' Heat Map for September 2023
In the financial landscape of September 2020, systematic trend strategies showed a mixed performance across various markets.
Equity indices took a hit, with long exposures being punished, as programs with longer-term horizons tended to perform poorly. However, programs with shorter holding periods or those trading opportunistically around a theme fared better during the month.
While direct data on the top performing sectors for systematic trend strategies in September 2020 was not readily available, some insights can be inferred. Sectors like technology, particularly semiconductors and IT services, have shown strong performance in recent years, driven by AI-related exposures and innovation trends. The industrial sector, supported by infrastructure and defense spending, also tends to feature prominently in market trend strategies. Financials, especially banks, can be important for systematic strategies due to their sensitivity to interest rates and macroeconomic cycles.
The currency markets, meanwhile, were dominated by a strengthening US Dollar versus most G10 (excluding Sweden) and versus emerging market (commodity) currencies (excluding Mexico). Long-term trend followers had a positive month, with the best performing sector being fixed income and rates, where most strategies were short and caught the rise in yields (bonds down), especially on the longer end.
Quant Macro strategies were also positive, catching some of the same moves as long-term trend programs, such as profits being short fixed income and rates and long US Dollar versus G10 currencies. Programs that were successful in the grain and livestock sector were short wheat and the soybean complex using outright directional exposures.
Long positions in the energy complex, namely crude (WTI, Brent), heating oil, and gasoline, were also profitable for long-term trend followers. Long USD versus most G10 and emerging market currencies, especially against shorts in Japanese Yen, Euro, and British Pound, was also good positioning for long-term trend followers.
It's important to note that the performance of a program within a "style basket" depends upon which of three groups the program falls into: programs currently or formerly on Hydra, programs under review with an expectation of being added to Hydra, or neither. The "style baskets" are classifications drawn by Kettera Strategies and are not investible products or index products.
Longer-duration systems, with holding periods ranging from months to years, slightly outperformed medium and shorter-term programs in September. The performance of a "style basket" is represented by arrows, with a sideways arrow indicating a largely flat overall performance, and a solid red down arrow indicating a largely negative performance compared to most months.
The indices and financial benchmarks shown by Kettera Strategies are for illustrative purposes only, are unmanaged, reflect reinvestment of income and dividends, and do not reflect the impact of advisory fees. The benchmark sources for Kettera Strategies include various index providers such as Eurekahedge, BarclayHedge, Société Générale, Bridge Alternatives, CBOE, and others.
Kettera Strategies created "style baskets" for research purposes to track various categories of programs on the Hydra Platform. The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group. It's also important to note that the performance numbers reported by index providers may be updated from time to time, and Kettera disclaims any obligation to verify these numbers or to update or revise the performance numbers.
Investors considering systematic trend strategies in finance might find sectors like technology, industrial, and financials appealing, given their recent performance and driving factors such as AI-related exposures, innovation trends, infrastructure and defense spending, and sensitivity to interest rates and macroeconomic cycles. With regards to investing, programs with shorter holding periods or those trading opportunistically around a theme may have performed better in September 2020 compared to programs with longer-term horizons.
