We’ve all had the weekend to think about the deeper impacts of Brexit. While the future narrative of the U.K. seems just as uncertain as the night of the vote, the markets is a space where you can see effects in real-time. Brexit may not have felt like a ‘crisis period’ for everyone; but it sure did for anyone in the UK, not to mention Italy and Spain – which saw record down moves in their stock markets. Which brings us to one of the best crisis period performers around – Managed Futures. Just how did they do on the Brexit days of Friday and Monday? Via the SG CTA Index:
As a whole, Managed Futures fared well in this binary market environment, a feat in its own right. The majority of the managers we have talked to are slightly below and slightly above these average numbers. And most are likely giving back some of the gains today as we see the proverbial dead cat bounce.
How do they do it? Did they predict the Brexit vote? Unfortunately, it’s not nearly that sexy. They did it by being boring, mostly. By canvassing the globe with small bets in a lot of different places – like US and foreign bond markets, like foreign currencies, like metals, and more. The ability to capture these types of moves doesn’t come from outrageous bets against the bank of England like George Soros made popular. The ability to capture them comes from being in all the moves, small and large. The Alpha comes from making sure you lose less on the small moves that don’t pan out than you make on the large moves that do pan out.
This ability to be in many places at once, to canvas the globe with both long and short bets in markets as varied as Soybeans and Japanese Bonds is the entire point of having alternative investments as part of your portfolio. It’s this ability to pull returns from different return drivers – ones others didn’t see coming. Managed Futures, in particular, know how to react in these crisis market environments, while at the same time having a non-correlation during stable market environments.
Who knows if this is a blip on the global radar or the start of the next financial crisis. More than a few have laid out the potential for it to set off a domino effect across the region in a sort of ‘Lehman Bankruptcy’ moment. But one rather smart Brit we spoke to had a different take, mentioning they (England) have been in the European Union for just 40 out of 2000 or so years, so no need to panic.
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
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