Managed futures

Managed futures managers finish April on a high note

Managed futures performed relatively well for April as commodities continued to trend higher during the month, a report by Lipper Tass says.

Long exposures to equities and large speculative short trades in euro futures sustained manager performance.

The Lipper Managed Futures/CTAs index registered a positive return of 0.63 per cent for April (+1.30 per cent year on year).

The degree of dispersion among individual fund returns declined from the previous month’s reading. A 31.66-percentage-point monthly performance difference for April divided the top and bottom performers of the actively reporting managers tracked by Lipper.

Although of a lower magnitude, April confirmed March’s readings. Managers with assets in excess of USD45m returned a better average performance at 0.93 per cent month on month—19 basis points above the average reading for the strategy. Large managed futures managers returned a positive 4.66 per cent on average for the 12-month rolling period at the end of April 2010.

Global stock markets went up a slight 0.07 per cent for April as measured by the MSCI World TR Index.

In the US the stock market registered a 1.58 per cent return, according to the S&P 500. Seven of the ten sectors included in the index finished the month in the black; consumer discretionary (+6.02 per cent) and energy (+4.43 per cent) led the performance league table, followed by industrials (+4.09 per cent) and utilities (+2.44 per cent). At the other end, healthcare (-3.91 per cent), consumer staples (-1.56 per cent), and telecommunication services (-1.40 per cent) were the worst performing sectors for the month.

Volatility as measured by the CBOE VIX spiked to a multi-month high, increasing
25.36 per cent from 17.59 at the end of March to 22.05 on 30 April, catalysed by a downgrade by S&P’s of Greece’s sovereign credit ratings to junk and of Portugal’s sovereign rating to A-.

Style investing registered positive performance, with mid- and small-cap stocks (+2.16 per cent) outpacing large-cap stocks (+1.85 per cent) and value (+2.59 per cent) outperforming growth (+1.12 per cent) stocks at the end of the month.

Developed markets (-0.16 per cent) ended the month in the red, dragged down by Greece (-11.47 per cent) and Portugal (-9.42 per cent) shares. Twelve of the 16 European stock markets edged lower on growing fear of a Greek debt crisis.

Despite declining from the previous month, emerging markets (+1.23 per cent) continued to post a positive return, led by Turkey (+6.47 per cent) and Indonesia (+6.03 per cent). All of the BRIC countries with the exception of India (+1.82 per cent) registered negative returns for the month—Brazil (-1.34 per cent), Russia (-0.78 per cent), and China (-0.59 per cent).

In the FX market the US dollar surged against most of the major currencies as U.S. economic conditions improved. Consumer confidence in the US increased further for April; the index stood at 57.9 at the end of the month, up from 52.3 for March. Meanwhile, employment grew at the fastest pace in four years, indicating the labour market had begun to stabilise. Nevertheless, the unemployment rate remained high, edging up to 9.9 per cent in April.

The US dollar again appreciated against the euro (+1.59 per cent) amid mounting Eurozone sovereign debt market concerns’ driving safe-haven demand for US dollar-denominated assets, but it declined 0.57 per cent against the sterling. The sterling benefited from positive macroeconomic readings, including Great Britain’s better-than-expected labour market statistics. Elsewhere, the greenback appreciated 0.37 per cent against the yen at the end of the month.

Commodities edged higher for April, with the Reuters/Jefferies CRB Index rising 1.60 per cent month on month, helped by precious metals (+6.04 per cent), grains and oilseeds (+7.36 per cent), and energy (+4.63 per cent).

Worries about Europe’s debt problems following the downgrades of Portugal’s and Greece’s debt contributed to flight-to-quality buying in gold (+2.39 per cent).

Sugar (-8.24 per cent) plummeted further during the month as the output of the 2010/11 cane crop in Brazil—the world’s biggest producer—was estimated to rise 17 per cent year on year, favoured by dry weather. Furthermore, India—the world’s second largest producer of sugar—had abundant monsoon rains to boost cane planting, raising projected sugar output for the year.

Crude oil (+1.85 per cent) rose, while natural gas (-1.05 per cent) dropped slightly.

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