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  • Jonathan Poyer

Fragile Risk Markets in October Show an Unstable Macro Environment


Reviewing the month of October to find some insights often leads us to a go-to resource, RCM Alternatives. They provide a very useful "scoreboard"that includes a managed futures, which is not often included in these types of resources.



This commentary seems helpful:


Cash held its ground, gaining +0.46% in line with interest rate hikes. Overall, October highlighted fragilities in risk assets given unstable macro developments. Looking ahead, diversified strategies that can adapt positions across asset classes may prove advantageous as uncertainty persists over the trajectory of inflation and policy response. Continued volatility can be expected in the coming months as these macro challenges play out.


Managed futures are an interesting "asset class" if you can consider them as such. In essence, managed futures as an investment portfolio of futures contracts. The markets they invest in are global and cover all sorts of different sectors. They also differ in philosophy in terms of the strategy: trend-following, momentum, market-neutral, etc.



The main "selling point", more or less, is that the strategies tend to have weak to negative correlation to stocks and bonds. Thus, more institutional types of investors employ these strategies in their portfolios and are used as alternatives to hedge funds to achive portfolio and market diversification.


Using the BarclayHedge CTA Index to represent managed futures, below shows a simple correlation matrix back to October 2009:



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