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Managed futures make a comeback in August as stock markets trend higher

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Managed futures managers were able to capitalise on bullish trends in the stock markets and long positions in a number of commodities in August, posting a 0.86 per cent return for the month, according to Lipper Tass.

This brings the sub-strategy’s performance to minus 1.80 per cent since the beginning of the year, and a positive 6.08 per cent for the rolling 12-month window in US-dollar terms.

Systematic trend-following and discretionary managers as well as high-frequency managers delivered solid returns for the month.

The degree of dispersion among individual fund returns increased from the previous month’s reading. A 29.91-percentage-point monthly performance difference in August divided the top and bottom performers of the actively reporting managers tracked by Lipper.

August reversed July’s reading. Managers with assets in excess of USD45m returned a worse average performance at 0.83 per cent month on month—three basis points below the average reading for the strategy. Large managed futures managers returned a negative 2.12 per cent for the year to date at the end of August and a positive 7.05 per cent for the rolling 12-month window.

Global stock markets were up 4.17 per cent for August as measured by the MSCI World TR Index, with the US equity market rising 3.61 per cent as reflected in the S&P 500 TR Index reading. The CBOE VIX Index was almost flat except for some volatility spikes after mid-month, increasing slightly from 25.92 on July 31 to 26.01 on 31 August.

Nine of the ten sectors included in the S&P 500 Index were up for August, led by financials (+12.86 per cent) and industrials (+4.14 per cent). Telecommunication services ranked at the bottom of the performance league table and was the only sector posting a negative return (-2.42 per cent).

Large-cap stocks slightly beat mid- and small-cap stocks, and value outperformed growth stocks at the end of the month.

Developed markets performed relatively well compared to emerging markets. In particular, the S&P Global BMI Developed Index edged up 4.23 per cent month on month, with Austria (+15.95 per cent) and Belgium (+10.83 per cent) posting double-digit returns.

Conversely, emerging markets posted losses for the month at the aggregate level, with China (-7.13 per cent), Taiwan (-4.01 per cent), and Chile (-3.60 per cent) lagging. The top gainer on the emerging countries league table was Hungary (+12.93 per cent).

The BRIC countries delivered mixed performance, with Russia (+4.18 per cent) and Brazil (+2.79 per cent) ending on a strong note.

The US dollar continued to erode in value against major currencies, declining 0.22 per cent month on month for August, according to the ICE Futures US Dollar Index (a trade-weighted geometric average of six currencies). Falling commodity prices put pressure on commodity currencies—namely the Australian, Canadian, and New Zealand dollars. Meanwhile, most Asian currencies declined against the greenback on concerns China’s plan to curb industrial production will hold back an economic recovery in the region.

The Commodities Reuters/Jefferies CRB Index lost momentum, dropping 1.46 per cent month on month as gains in base metals and soft commodities were offset by large losses in energy and livestock. Sugar hit a 28-year high as concerns about the shortage at big food companies mounted. While copper (+13.09 per cent) and lead (+12.12 per cent) trended higher in August, natural gas (-24.62 per cent) declined significantly and lean hogs also sold off hard (-10.65 per cent). At the same time copper’s three-month delivery dropped at the end of the month, pulling back from an 11-month high as a sharp dive in the Chinese and US equity markets dampened economic recovery hopes. Also, a firmer dollar contributed to drag prices down.

Oil prices continued to drop, yet prices remained high on a weakening dollar. Natural gas prices tumbled, hitting new seven-year lows, on a report that the US cut energy usage and on above-normal natural gas supplies placed into storage. The US Energy Information Administration reported a bigger-than-expected 54 billion cubic feet of inventories in addition to natural gas stockpiles for the week ended 21 August, bringing the current storage level to 3.26 trillion cubic feet.

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