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Managed futures have been performing well this year. The primary explanation of what’s driving performance this year is being long rates/fixed-income. Here’s AQR’s attribution chart from their Q2 presentation, courtesy of AQR (the numbers are for the lower vol version of the strategy, but the direction and relative magnitude of performance are the same for the HV version that we own):
July and August-to-date have been strong, with the funds we use up about 5% (PIMCO TRENDS Managed Futures Strategy, PQTIX) and 14%–15% (Natixis ASG Managed Futures Strategy, ASFYX, and AQR Managed Futures Strategy HV, QMHIX). Below is a bar chart from the SG Trend Indicator website that shows a similar breakdown for that index through last Friday, August 16, courtesy of SG Prime Services. As you can see, over 100% of the year-to-date performance is from rates/bonds. The Trend Indicator is a set of simple trend rules that are a pretty good proxy for major trends that you’d expect to find in most trend-following portfolios, although every manager has different models, asset class weightings, etc. (In August, commodities and currencies are also positive, but the story of the year is bonds.)
Also, we share below another page from AQR’s presentation that’s a good reminder of the benefit of trend following as part of a portfolio. Managed futures have delivered long-term returns similar to a global 60/40 portfolio but they’ve been uncorrelated, and they’ve tended to do well when equities struggle.
This isn’t anything we haven’t discussed previously, but it may be helpful to see the longer-term chart to give some perspective relative to the largely disappointing returns we’ve experienced in the (still) relatively short period we’ve been invested in the strategy.
—Jason Steuerwalt, CFA
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