Auspice Managed Futures Excess Return Index (AMFERI)
Market Review
AMFERI gained 1.47% in November. Gains were made in most sectors covered by the strategy including Energy, Metals, Interest Rates and Currencies with a small loss in Ags.
Index Review
The index is up 2.13% YTD. See Table 1.
Table 1: YTD Returns
As seen in Table 2, the long term performance of AMFERI versus both investable and non-investable managed futures indices has been exceptional. Since the launch of the index in December 2010, AMFERI continues outperform on both an absolute and risk-adjusted basis.
Table 2: 3 Year Annualized Performance
As a single strategy CTA index, this strategy provides the benefits of traditional CTA through trend following and risk management along with the benefits of transparency and third party publishing, monitoring and benchmarking. The strategy now underlies ETFs, 40 act mutual funds and managed accounts providing a low cost means of allocating to Managed Futures without sacrificing performance.
Portfolio Recap:
In November, the index was up in 4 of 5 sectors.
Figure 1: Monthly Index Return Attribution
Energy
The petroleum side of the Energy market went in different directions with Gasoline and Heating Oil rallying where the index is long. However, Crude Oil was weak and the index exited its long position and shifted short mid-month. The market continued lower and this was also profitable. Natural Gas rallied against the short weight and was the only loss against net gains in the sector.
Metals
The Metals sector led the index higher during the month with all components trending down. The bulk of the gain came from weakness in Gold and Silver with Copper adding a smaller gain.
Agriculture
The Ag sector softened overall in November while Grains added value. The sector has both long and short weights within the sector and within the Grain and Soft Commodity sub-sectors. Gains were made in long standing short weights in Corn and Wheat with the long Soybeans position adding a similar benefit. However in Softs, the recently added weights - long in Sugar and short in Cotton, dragged down the sector resulting in a small loss.
Interest Rates
The Rates sector added a small gain to the index from both the long and short side. The curve play at work (higher rates long term, lower rates short term) provided gains from the recently added long position in 5 Year Notes as well as the established shorts in 30 Year Bonds and 10 Year Notes.
Currencies
Currencies also provided a gain to the index as long weights in British Pound, the Euro, and the recently added long weight in Aussie dollar, resulted in a small loss. This was offset by gains from the short side in Canadian Dollar, Yen and US Dollar Index.
Outlook
Managed Futures is holding its own in an environment dominated by one sector. Equities continue to rally, a sector not covered by the index. However, the AMFERI continues to find value despite these challenges, through agile positioning across a much more diversified asset base of commodities and financial markets. The index is taking advantage of both long and short opportunities in a disciplined fashion. It is important for investors to understand the long term benefit of diversification especially at times when the markets becomes fixated in a singular direction. From these times of extraordinary Equity gains, the benefits of non-correlation become most apparent and rewarding.
For those interested in a copy of an analysis of the drawdown and recovery periods for AMFERI, please contact Auspice. See synopsis below.
Managed Futures is typically a difficult strategy to time because of the non-correlated performance that results from the widespread diversification of market sectors covered. One of the best ways to consider an entry point is through an understanding of drawdowns over time. Pullbacks occur in every strategy, however given transparency of the returns, it is intuitive to analyze the character of the pullbacks and subsequent gains with managed futures. These pullbacks generally represent an opportunity from which trends develop and extend. Furthermore, the time to make new gains is often quicker than the length of the pullback (peak to valley). Please contact us at Auspice for the complete analysis.
Strategy and Index
The Auspice Managed Futures Index aims to capture upward and downward trends in the commodity and financial markets while carefully managing risk. The index will use a quantitative methodology to track either long or short weights in a diversified portfolio of 21 exchange traded futures which cover the energy, metal, agricultural, interest rate, and currency sectors. The index incorporates dynamic risk management and contract rolling methods. The index is available as either a total return index (includes a collateral return) or as an excess return index (no collateral return).
About the Index Provider
Auspice is an innovative asset manager that specializes in applying formalized investment strategies across a broad range of commodity and financial markets. Auspice’s portfolio managers are seasoned institutional commodity traders. Their experience, trading one of the most volatile asset classes, forms the backbone of their strategy for generating profits while preserving capital and dynamically managing risk.
Auspice Capital Advisors Ltd. is a registered Portfolio Manager / Investment Fund Manager / Exempt Market Dealer in Canada and a registered Commodity Trading Advisor (CTA) and National Futures Association (NFA) member in the US. Auspice’s core expertise is managing
risk and designing and executing systematic trading strategies.
Auspice uses its diverse trading and risk management experience to manage 4 diverse product lines and has been described as a “next generation CTA”, offering strategies in active managed futures (CTA), passive ETFs, enhanced indices and custom commodity strategies.