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Food And Beverage
CIO Bulletin
25 March, 2024
Hedge funds using systematic strategies outperformed their competitors in the first quarter, due to soaring cocoa prices and market volatility caused by inflation and geopolitics.
Different from traditional hedge fund managers, who make the trade decision themselves, systematic hedge fund managers use coding and algorithms to determine whether to find trades strong enough to become market trends.
According to Barclays' prime brokerage, which monitored the performance of 40 "classic trend" hedge funds, these trend funds made an average gain of over 9% in the first two months of 2024, compared with a gain of 2.6% for the entire hedge fund sector.
According to the sources, their success was indicative of the increasing volatility of markets and the regional variations in market fortunes.
Hong Kong's Hang Seng is down almost 2%, despite the U.S. S&P 500 up over 11% so far this year. China's stock market has gained just 3%, while Europe's markets have gained only 6%. Japan's Nikkei has risen more than 20%.
Commodity markets have also been volatile, but systematic hedge funds have benefited from cocoa's steady rise to all-time highs.
According to two investment sources, returns were strengthened by long cocoa trades held since the first half of 2023.
Due to poor crop yields at top producers in Ghana and Ivory Coast and processors' haste to obtain cocoa beans, cocoa prices have more than doubled in the last year.
Winton Capital, a British hedge fund, permits approximately 9% volatility on its $2.8 billion systematic commodities trading advisor (CTA) approach. According to a person close to the company, it reported a positive 9.1% for the year ended March 20. Profits came from the yen, natural gas, stock indexes, and cocoa.
Investment firm Transtrend, based in Rotterdam, raised its $5.4 billion portfolio to around an 18% return for the year ending March 21st, thanks to long bets on cocoa and short positions on cereals.