Over the 12 months ending October 31, 2016, returns across Managed Futures and Global Macro/Absolute Return have been mixed, according to Zenith Investment Partners 2016 Managed Futures and Global Macro/Absolute Return Sector Review. The Global Macro/Absolute Return peer group tended to deliver stronger performance.
Rodney Sebire, Zenith Head of Alternatives Research, said “Managed Futures produced a disappointing year in terms of net returns, with Zenith’s rated managers producing an average return of -3.2% for the 12 months ending 31 October 2016. In terms of the Global Macro peer group, performance was stronger with an average return of 3.5% over the same period” he said.
“Both peer groups struggled to extract meaningful returns from traditional asset classes. In particular, equity markets provided a challenging environment with periodic bouts of euphoria, offset by episodes of extreme risk aversion. While global equity markets were down approximately 5.7% for the 12month period, the return pattern was volatile and heavily sentiment driven” Sebire said.
In the sector report, Zenith addresses the performance of Managed Futures in a rising government bond yield environment. The sceptics of Managed Futures are quick to highlight that these strategies have benefited from a secular bull market in bonds. While Zenith acknowledges that this has provided a tailwind to returns, we hold the view that trend following techniques have been the dominant driver of returns in the fixed income sector, and we expect this to continue in the future.
Finally, the appropriateness of the level of fees charged by the Managed Futures and Global Macro/Absolute Return peer groups is addressed. With RG 97 (Disclosing fees and costs in PDSs and periodic statements), coming into effect on 1 Feb 2017, the disclosure requirements for managed investment schemes are about to increase, which Zenith believes will add further intensity to the fee debate.
To assist with the debate, Zenith has produced a detailed overview of the key metrics that were used to determine the suitability of fee structures, particularly with respect to these strategies. Full details are available in the report.
