Auspice Managed Futures Excess Return Index (AMFERI)
Market Review
AMFERI declined 0.86% in October. While gains were made in Energy and Metals, this was offset by the losses in Ags, Interest Rates and Currencies.
Index Review
The index is up 0.65% YTD.
As seen in the next table, 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.
As a single strategy CTA index, this strategy provides the benefits of traditional CTA through trend following and agility 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 October, the index was up in 2 of 5 sectors.
Energy
Natural Gas provided a solid gain from the short side in October while Gasoline, Heating Oil and Crude resulted in losses on the long side.
Metals
The Metal sector was slightly positive overall and remains positioned all short. Gold and Copper provided gains from the short side while a small rally in Silver provided a small loss.
Agriculture
The Ag sector struggled in October as a result of a couple of position changes and shifting trends. Sugar was changed to a long weight early in the month as new quarterly highs were made early in the month. Conversely, Cotton was tilted to a short weight as the market continued to soften. Short positions in Wheat and Corn remain beneficial, offsetting a small loss from the remaining long Soybeans weight.
Interest Rates
Bonds moved higher while the index remains short 30 Year Bonds and 10 Year Notes resulting in a small loss. The index shifted the 5 year Notes to long near month end as the rally shows signs of strength.
Currencies
A small loss from Currencies as long weights in British Pound, the Euro, and a new long weight in Aussie dollar came under pressure at month end. Gains from short weights in Canadian Dollar, Yen and Dollar Index were made but did not offset the long exposures. Currencies remain choppy at this time.
Outlook
Managed Futures remains in a challenging investment environment where much of the gains being made are in equities, a sector not covered by the index. However, the low cost transparent approach provides investors an opportunity not to miss potential performance and increase diversification.
For those interested in a copy of an analysis of the drawdown and recovery periods for AMFERI, please contact Auspice. See synopsis below.
Synopsis of AMFERI Drawdown and Return analysis.
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 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.