August 2011 Managed Futures Breakdown

While the first three days of September have made August seem like years ago already – we are just three trading days removed from the end of August (thanks to the holiday) and ready to report on the CTAs we track through the end of August.

In review- August 2011 will go down as one of the most volatile months in recent history, which is no small feat- standing in the shadow of periods like October 2008. Major U.S. stock indices averaged losses of -6.07% for the month (and were down -14.7% on their lowest levels) , while U.S. 30 year bonds 10 year notes jumped 7.71% and 3.85%, respectively… despite an unprecedented downgrade of the U.S. credit rating right as the month kicked off.  Meanwhile, Gold powered through $1,800 on its way to $1,900, only to come crashing down back into the $1,700s. Not to be left out, poor crop reports fueled a surge in agriculturals that saw corn gaining 14.47%, wheat jumping 11.00% and Soybeans up 7.38%. If that’s not a month full of action, we’re not sure how else to entertain financial spectators eyeing the futures markets.

This volatility spike and reversal off the lows proved difficult for many strategies (indeed, the managed futures indices were down about -2% in August), and there were some outlier sized losses to contend with.  But of those strategies we track which try and correlate with managed futures- namely, the systematic multi-market programs- 15 out of 17 were able to post gains during a crisis period (thanks in large part to bonds).  All in all – just what we want to see.  Below is the August managed futures breakdown by category.

[DISCLAIMER:The following performance numbers are calculated using the liquidating value of a single client at Attain trading the listed program, and are believed to be representative of all similar clients invested in the program.  A 20% incentive fee and 2% annual management fee are deducted from all profitable months, regardless of whether the program is at a new equity high.  These numbers may vary from the actual performance numbers presented by the CTA upon completing their accounting for the month gone by, and should not be considered apart from the performance numbers listed in the disclosure document for the program listed]

Systematic Multi-Market

Systematic multi-market traders had an exceptional month on the whole, with most of the programs we track posting positive returns in August. While some of those returns were not as high as we would have liked, it’s hard to ignore the breakout performance of programs like Clarke Capital Global Basic and 2100 Xenon (2x) Managed Futures.

Short-term Systematic

Short-term systematic traders struggled a little more than their longer term counterparts. While volatility is typically a good thing for these traders, as it produces a wider variety of short-term trends for them to latch onto, August was almost too volatile for many of them, with choppy conditions making trades more difficult in the long-run. Stay tuned for further commentary on how this has impacted Dominion Capital, in particular, tomorrow morning.

Option Traders

As we expect during any volatile time period, August was rough on option sellers, as they are literally betting against volatility. We’ve covered how these conditions impacted FCI, in particular.

Spread traders we track were able to stay positive this month, even in the face of wildly fluctuating prices. Even so, the gains were smaller than that of their successful systematic multi-market brethren.Spread Traders

Stock Index Traders

It was feast or famine among the stock index traders we track. The simple explanation for why is that Paskewitz tends to follow more of a contrarian approach, betting against the trend, while Roe tends to stick closer to it. This time around, market conditions benefited Roe.

Specialty Traders

Specialty traders in August did what they do best- focus. As a result, the specialty managers we track were all positive for the month, as diverse as they may be (fixed income v. forex v. gold).

Discretionary Traders

As is usually the case for discretionary traders, who would make money during the August financial mess was anyone’s guess. The results were spread out- ranging from Global Ag’s excellent returns to Dighton’s crash and burn.

The Month Ahead

Predictions for market conditions in September are as diverse as Lady Gaga’s wardrobe right now, as the Bears and Bulls battle it out in stocks, Europe pushes its financial health to the brink and global growth concerns push commodities downward. If we get further downside in stocks (and upside in bonds) all while experiencing volatile intraday swings, expect similar performances from each category.