Despite fears about Dubai’s debt crisis triggering choppy conditions in equity markets toward the end of November, managed futures managers benefited from long equity and commodity-trading exposure and posted the second strongest monthly gain of the current year after May’s.
According to Lipper Tass, both systematic and discretionary managers performed well on average, but high-frequency mean-reversion traders continued to underperform.
The strategy returned a positive 3.10 per cent performance, according to the Lipper Managed Futures/CTAs index—fully recovering from October’s loss, a modest 0.71 per cent gain since the beginning of the year, and a positive 4.07 per cent for the rolling 12-month window.
The degree of dispersion among individual fund returns decreased from the previous month’s reading. A 37.89-percentage-point monthly performance difference in November divided the top and bottom performers of the actively reporting managers tracked by Lipper.
November resumed September’s reading. Managers with assets in excess of USD45m returned a better average performance at 3.62 per cent month on month—52 basis points above the average reading for the strategy.
Large managed futures managers returned a positive 2.28 per cent for the year to date at the end of November and a positive 4.30 per cent for the rolling 12-month window.
Global stock markets (as measured by the MSCI World TR Index) rebounded 4.14 per cent for November. In line with the worldwide picture US equity markets rallied, with the S&P 500 TR Index jumping nearly 6.00 per cent, completely cancelling the 1.86 per cent decline for October.
The rally of all three major US stock indices paused, however, following the news on 27 November of Dubai’s debt crisis, which sparked investor fears about the start of another financial crisis. Developed markets jumped 4.43 per cent month on month, with only four of the 22 developed countries in the red. All emerging markets (+4.25 per cent) except Egypt (-16.11 per cent), Morocco (-6.53 per cent), and Turkey (-6.60 per cent) posted gains.
Nowhere was the rally more pronounced than in Latin America (+8.33 per cent), with Peru (+11.97 per cent) outperforming as all countries posted solid performance. November also registered gains in BRIC shares, with India (+8.38 per cent) and Brazil (+8.15 per cent) contributing the most.
The US dollar continued to lose value against other major currencies, although safe-haven flows in US dollar-denominated assets before the end of the month helped limit the slide to minus 1.99 per cent for November and minus 7.84 per cent year to date, according to the ICE Futures U.S. Dollar Index.
The Australian dollar appreciated 1.77 per cent month on month against the US dollar as money markets and Australian dollar-denominated assets recovered at the end of the month in line with equity markets. Concerns about the impact of a debt default in Dubai faded, with markets pricing in a 60 per cent chance of a 25-basis-point rate tightening at Reserve Bank of Australia’s meeting on 1 December.
Sustained by a weaker US dollar, advances in global stock markets and US interest rates staying on a declining pattern, commodities trended higher in November, returning 2.60 per cent month on month (+20.85 per cent year to date), according to the Reuters/Jefferies CRB Index.
Long positions in grains and oilseeds (+10.41 per cent), along with exposure to wheat (+8.58 per cent), were profitable during the month. Industrial metals (with aluminum, copper, lead, and zinc driving the rally) also sustained the performance of the index.
Gold continued to shine, with the gold spot price soaring to a fresh record high on November 25 at USD1,182.41 an ounce. At the beginning of the month the gold price was buoyed as the International Monetary Fund sold 200 tonnes of gold to the Reserve Bank of India for USD6.7bn, smoothly executing half of a long-planned bullion sale that had threatened to slow gold’s rally. IMF’s gold sale to the Reserve Bank of India prompted price speculation that China, which has reportedly been in talks with the IMF as Beijing attempts to shift some of its more than USD2trn in FX reserves away from the US dollar, might follow.
