December 30, 2016
rcm-alternatives
Like
Twenty-sixteen is just about in the books, which means it’s our cue to draw some quick conclusions about the performance of the various commodity futures markets. Now that crude oil looks like it’s bottomed off from it’s multi-year decline, people are starting to get bullish on long-only commodity ETFs – with some even suggesting the rebirth of the commodity super cycle in 2017. Bloomberg had a nifty chart showing the three month and YTD performance of the different futures sectors, seen below, with the size of the circle representing the weight each of those sectors represent in the long-only commodity ETN, $DJP.
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Bloomberg
We’re not sure what the importance of the last quarter is for Bloomberg, here, but you’ll notice the energy markets and the industrial markets are the only markets able to log positive performance over the last quarter and last year, while all sectors besides livestock and grains were able to stay on the right side of that 0 line for the year. Interestingly, those two were positive performers in the 4th quarter, which led to some losses for systematic programs which had ridden their sell offs down until the Q4 reversal. As for the weighting in the $DJP ETF, well you know we don’t think broad based long-only commodity ETFs are the best idea.
How about the individual markets? If you break out the futures sectors into their own markets, there’s no doubt that most “commodity” futures markets ended the year in the green. Here’s the 2016 performance of the 47 futures markets listed on our quote service of choice, Finviz.
[Please note – Finviz does some weird things around contract rolls, which can make their percentage gains over longer periods different than what would be found using a continuous contract or the cash/spot market, nonetheless, we feel it is fairly representative of each market’s 2016 movements]:
(Disclaimer: Past performance is not necessarily indicative of future performance)
Courtesy: Finviz
Observations on the 47 futures markets tracked by FinViz:
- 75% of the markets ended in the positive
- Ethanol took the number one spot, up 45%, despite the fact that the nation’s leader in ethanol production, Iowa, produced a record 4.1 Billion gallons. Oil wasn’t far behind, with 3 of the top performers coming from the energy sector
- Not all markets in the same sector are as correlated as people think. Wheat ended down -23%, while Soybeans were up 16%. Sugar was up 21% while Cocoa was down 31%
- Despite all the talk of rates rising, the 30-year bond futures were actually up slightly at +1.39%
- Despite Brexit, Trump, and Syria – the VIX was down on the year 20%
- Speaking for Brexit, the British Pound had a massive move for a G7 currency – down -16% for its worst year since 2008
It’s important to remember that time is a social construct, and looking at the performance over the past “year” is just a way for people to benchmark performance when it doesn’t always need to be “benchmarked.” Trends don’t form based on what a market did last year, they form based on a plethora of supply/demand and potential geo-political events. The goal is to put yourself in a position to capture some of these moves in the most risk controlled way as possible. For instance, Brent crude was up 27% this year, and it seems everyone is talking about a further upward trend in 2017. Instead of guessing about the future price of oil, we would suggest checking out mangers who make profits when the price of oil moves up and down – or the 4 Managed Futures Managers on our list who could make money from a bounce in Crude Oil.
Cheers to 2017 – and the futures markets moving – no matter the direction!
P.S – Be on the lookout for our 2016 Strategy Review in the Managed Futures world in the coming weeks!
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.
The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.
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. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.
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.
Limitations on RCM Quintile + Star Rankings
The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.
See the full terms of use and risk disclaimer here.
