The Managed Futures Strategy Fund posted positive returns of 6.42% for the month of August as all but one of the major sectors finished in the black. This month the largest gains came from interest rates. Concerns regarding trade wars and the expectation of accommodative central banks drove fixed income prices higher. Gains were across the board as bonds in Asia, Europe and North America each contributed significantly to the positive performance.
Currencies were another strong performer in August. The dollar rallied against counterparts in Australia, New Zealand, Poland, Czechoslovakia, Norway and Sweden as those economies have struggled relative to the US dollar as of late. Meanwhile, short Australian dollar and British pound against the Japanese yen also aided performance due to a weakening Australian economy and concerns over Brexit. While the sector was positive in August, losses were registered from long Mexican peso and Russian ruble against the dollar, which were liquidated during the month.
Commodities contributed positive performance for the fund as well, led by the metals. Long gold in both the United States and Japan proved profitable for the fund as investors continued to pour into the yellow metal as a safe haven. Short positions in copper and aluminum also aided performance as prices fell due to slower consumption in China and Europe. A long position in nickel, which was established during the month, contributed significantly after Indonesia said it would put a ban on nickel-ore exports earlier than expected, raising concerns of a squeeze on supply.
Falling prices in softs and grains, which included coffee, sugar, cotton, soybeans, soymeal and wheat, were also additive to performance.
Energies provided the only negative performance for the commodity sector. A drop in carbon emission prices and a rally in natural gas led to the draw in energies. The fund continues to remain on the sideline in the crude complex as a trend has yet to present itself in oil or its products.
Stock indexes accounted for our lone loss among the four major asset classes. A long bias towards global stocks contributed to the weak performance with the only significant gain coming from our sole short position, the Japan Stock Price Index, commonly referred to as TOPIX. Equity volatility from the trade wars with China led to liquidations of indexes in Germany, Sweden, the UK and the US.In commodities, grains provided the largest positive performance. Unresolved trade wars between the US and China significantly weighed on wheat and bean prices, which was beneficial to our short positions. In softs, short coffee has been a profitable trade with prices hitting a six-week low during the month as frost risks have diminished in Brazil. Our lone negative sector for the month was meats due to rising feeder cattle prices.Performance (as of 6/30/2019)
While the number of overall positions did not change significantly month over month, sector exposure experienced adjustments. With the stock market volatility in full swing, our exposure to equities has decreased by over 30% from the end of July. Meanwhile, our exposure in commodities increased as we added positions including long silver and nickel and short cattle and hogs. While exposure to currencies remained relatively unchanged from the end of July, we did decrease fixed income somewhat due to risk adjustments resulting from increased volatility in global yields.