A $300 Billion Quant Trade Wins in ‘Almost Unbelievable’ Market (link)
Quantica Capital, a $750 million Swiss CTA, which is up around 9% so far this year, profits from one of the biggest bond shorts in its 16-year history. CTAs, which use the futures market across assets, climbed 5.2% in February and are one of the best since 2000.
“Rising inflation environments are good for CTAs,” said Kathryn Kaminski, chief research strategist at quant firm AlphaSimplex. “You have a lot more movement and it’s relatively disruptive.”
Andrew Beer’s iM DBi Managed Futures Strategy ETF, which imitates CTA exposures, has been adding oil longs and increasing bearish bets on long interest rates, their data show.
Much will now depend on the longevity of the reflation trend. Already, there have been some signs of a reversal, with CTA performance taking a hit on Thursday when commodities and stocks fell.
Northern Trust inks deal with quant specialist Two Sigma to offer Venn analytics tool to clients (link)
Venn platform – which provides access to a wide range of funds, stocks, and indices, as well as factor analyses and portfolio optimisation tools – will support Northern Trust’s asset allocator clients in their asset allocation, manager selection and quant investment processes
New venture builds on Northern Trust’s existing Whole Office approach and helps strengthen front office investment processes as investors and managers aim to drive performance and lower their cost.
Two Sigma launched the cloud-based Venn software in 2019, with the aim of helping investment teams better understand risks and opportunities across a diversified multi-asset portfolio.
“Excess returns”: UBP alternatives group targets Covid-hit credit with new distressed fund (link)
The new strategy aims to raise between USD200-300 million in assets, which reflects the size of the opportunity set. “We’re aiming for that middle-market, the mid-cap opportunities, in distressed investing; companies usually with EBITDA of USD10-75 million per annum,” explains Boley
Large names able to access government support while mid-cap found last year particularly challenging, “It’s here where you can find attractive credits, which are still providing a good yield and will actually be very attractive names as and when they come out of some form of restructuring.”
“We decompose the expected returns at the strategy level and the manager level, to determine how much is passive beta and a hedge fund premium, meaning the peer group return, and then, from there, we determine the excess return.”
“We set up investment guidelines for each of the four sleeves, and appointed a specialist to run each sleeve. Therefore we can control which asset classes and which geographies the fund is exposed to, as well as the capital structure, sizes, and so on.”
“You get that very attractive entry point where you can capture the value premium, and that generates a healthy component of a 15 per cent type return for a credit strategy,” he explains. “But then the real added value comes from the ability of the managers we appoint.”
How data is driving quant hedge fund Aspect Capital’s global macro gains (link)
The ASGM fund is made up of 30 trading models across 14 investment themes, targeting shorter-horizon alpha opportunities in liquid financial futures and forwards markets.
Despite 2020, Aspect Systematic Global Macro Strategy generated positive returns during “multiple market environments” thanks to a diversified set of trading models. “The complementary nature of the different data types provides access to a diversified set of return drivers with the ability to generate returns in multiple market environments,” the firm says.
Gaining 6.35 per cent for the year, with half of the gains coming from bonds amid investors’ rapid flight to safety and the subsequent stimulus packages influence on inflation expectations. The second-half returns meanwhile were dominated by trends in equity markets.
“With differing responses and recovery speeds across the globe, ASGM’s approach looks well placed both to provide rapid response to short-term dislocations, complementing medium-term trend capture, and to benefit from relative value opportunities.”
Emerging markets hedge funds surge on vaccine optimism and lockdown easing (link)
EM hedge funds gained 12.7 per cent in 2020. China-focused strategies powered the advance, its Index soaring more than 26.3 percent. The capital mushroomed to a new record of USD256.6 billion at the end of 2020, a rise driven by gains in EM regional equity markets and surging cryptocurrencies.
HFR president Kenneth Heinz said institutions and investors are continuing to add to their exposures in EM and cryptocurrency hedge funds, positioning for a “continuation of powerful and favourable EM and cryptocurrency trends throughout 2021.”
MENA finishes the year 2020 up 2.5 per cent, outflanking the narrow decline in Middle East equities. Similarly, Russia/Eastern Europe Index brings its annual returns to 6.2 per cent, topping the Russian equity slide by over 1650 basis points. Latin America-focused funds pared the year-to-date decline to -9.2 per cent, HFR said.
Elsewhere, Heinz noted that a number of managers across EM regions as well as Japan have piled into cryptocurrency strategies, pushing the HFR Cryptocurrency Index to a near-200 per cent rise in 2020 as many digital currencies hit record values.
Hedge funds cement successful start to 2021 as more investor money pours into industry (link)
Hedge funds attracted USD6.39 billion of new capital last month as investors piled into a wide variety of strategy types.
Macro managers drew in USD3.07 billion of new money last month, while managed futures added USD2.15 billion in investor capital. The allocation numbers mark a reversal in fortunes, as both funds suffered negative flows over the past 2-3 years.
Directional credit, multi-strategy and event driven funds each pulled in USD1 billion in new money, while convertible arbitrage (up USD230 million) and distressed-focused strategies (USD140 million) were marginally positive for the month.
On the flipside, though, long/short equity hedge funds suffered net outflows over the course of January, with allocators yanking some USD3.08 billion out of these strategies. Market neutral equity registered outflows of USD220 million last month, while investors also withdrew USD1.61 billion from relative value credit.
Long story short, and no pun intended, the industry is off to a pretty good start in 2021. Not everyone is feeling it, especially within isolated credit and long/short equity segments, but beyond that, there has been a fair amount of success to start the year.”
Dan Loeb Is the Latest Billionaire to Dive Into the World of Crypto (link)
The hedge-fund manager referenced Steve Jobs as he called for openly engaging with the subject while maintaining healthy skepticism.
Loeb’s comments were in response to a NFT blog post by Chris Dixon, he expounds upon the role that non-fungible tokens will have on digital creators.
NFTs have become hot commodities, those artistic creations are publicly verifiable records — non-fungible tokens — that ascribe ownership and authenticate their provenance through public blockchains.
Loeb wrote “Another conflict to overcome is the idea that being late to the crypto party will inevitably lead to one taking the sucker seat at a high stakes poker table versus this still being early days in what is just now being adopted in the mainstream,”