Trend-following hedge fund specialist Metori Capital scores double-digit gain amid 2020’s upheaval

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Paris-based systematic CTA specialist Metori Capital’s Lyxor Epsilon Global Trend Fund is building long positions across US and UK fixed income, US and Japanese equities, and in the euro at the start of 2021, having generated a strong annual double-digit gain last year amid extreme market conditions and record volatility.

The long-running managed futures strategy – which invests across equity indices, short-term rates, government bonds and currencies in both developed and emerging markets, using a hybrid investment style combining global macro and quant trend following – advanced 10.8 per cent annually in 2020, with 7.1 per cent volatility.

The fund’s assets grew by USD222 million last year, bringing AUM to USD663 million.

By comparison, the Société Générale Trend Index was up 6 per cent, with 10.4 per cent volatility, over the same period, while the HFRX Global Hedge Fund Index made 6.4 per cent, with 4.8 per cent volatility last year.

Overall, Metori outflanked stocks on a risk-adjusted basis last year, while maintaining a negative correlation to equities, the firm said in a commentary. 

Specifically, Epsilon’s 2020 gains were driven by successful bets predominantly in US fixed income, followed by US and Japanese equities, and UK fixed income.

On the downside, European equities brought the biggest losses over the last 12 months, followed by EM currencies, European fixed income, and UK equities. G10 currencies and Japanese fixed income were mixed, ending the year slightly positive and negative, respectively.

Metori was established in 2017 by a team of former Société Générale and Lyxor Asset Management employees, who spun out to independently manage the UCITS compliant Lyxor Epsilon Global Trend Fund.

In an interview with Hedgeweek in October, Nicolas Gaussel, the firm’s founding partner and CEO, pointed to renewed allocator interest in CTAs lately. He noted Metori’s emphasis on risk control and decorrelation has helped underline their value to investors’ portfolios during 2020’s market upheaval.

Now, as 2021 kicks off, the strategy is long US fixed income (chiefly Eurodollar and the short end of the bond curve); long UK fixed income (short sterling and UK gilts), and long Italian BTP (short and long term), the firm explained.

In equities, Epsilon is long US equities – across the Nasdaq, S&P500, MidCap 400, the Russell 2000, and the Dow Jones – as well as long the Nikkei, and remains out of equities in other regions. Overall, the net nominal equity exposure is 40 per cent.

Its main currency trade in early 2021 is a euro long, followed by a short in Japanese yen and a long Swiss franc position. It also has a small short in sterling, and remains short in emerging FX, specifically Brazil and Russia.  Overall, the Epsilon Fund runs a net short USD exposure of -33 per cent.