April managed futures disappoints - could not catch commodity move

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The SocGen managed futures index declined by over 2 percent for the month of April. This decline was in the face limited movement in equities and fixed income markets for the month and a strong move for commodities. Currently, the managed futures index, year to date, is higher than equities but has fallen behind bonds and commodities.

The monthly returns for an asset class can miss the gyrations that may occur during the month, but equity as well as fixed income markets were relatively calm for April relative to what was seen earlier  in the year. The mix of continued unconventional monetary policies even with no further action by the Bank of Japan and increased fears of slower global growth were enough to keep stocks and bonds somewhat rangebound. 

What is surprising is the negative performance in the face of strong upward trends in commodities. There are no rules of thumb, but trend-followers generally will do better in up markets than down markets. Up trends are usually smoother. That said, the commodity markets showed wide swings in intraday ranges especially in the grain complex. Along with a renewed trend in oil markets, grains and a number of soft showed up trends, albeit with higher volatility. 

High volatility always causes a longer lead time before entry into trends and usually results in smaller sizing of positions. If the current commodity trends continue, we expect CTA's to show better performance in May.


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