No Volatility, No Bueno for Managed Futures / Macro

For those who trade volatility for a living – this is starting to feel a lot like the dog days of mid-2014. Two years ago, the markets were overly complacent. And we’re not just talking the VIX and stock market volatility.  It was everywhere – energies, Currencies, Grains, as well as stocks and bonds. We wrote about the coiling of volatility, wondering what was going to uncoil all that pent up energy and make the cork pop. A couple months later, we knew the answer was crude oil and its major sell off.

Fast forward to today, and it’s easy to see that Managed Futures/Global Macro managers are chomping at the bit to see a volatility uptick. “Managed Futures Thrived from Brexit,” but since that, it’s been a steady diet of losses as volatility has been sucked out of just about everywhere once again. Nowhere has that been clearer than in currency volatility, where Bloomberg’s posting of JP Morgan’s Global Currency Volatility for the year reminded us of more than a few hedge fund equity curves for 2016.

Managed Futures Global Currency Volatility

Overlaying the SocGen CTA index on top of this currency volatility chart, you can see the high correlation between managed futures returns and the level of volatility in Global currencies.  The question now is whether this is a new normal (as dangerous of words as you’ll find in the investment space), or whether we’re simply trading no risk (volatility) now for increased risk later.  Brexit surely seemed like the event that would bring volatility back in a big way, but that was a short-lived spike as our volatility panel discussed.

In the end, this type of market contraction – both in prices and volatility – naturally leads to a counter move where there is a breakout from those ranges – either up or down.  Whether the catalyst for such breakouts is the election in two weeks time or the next Fed meeting,  something’s needed to shake these markets out of their extended nap.

P.S. – One silver lining for managed futures may be the uptick in the U.S. Dollar Index (up 3% in October), off of a plummeting British Pound and Euro. This can work as a standalone trade, or assist in pushing trends elsewhere as most all commodities are priced in U.S. Dollars.

 

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, 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.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, 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.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.