LONDON, July 13 - Trend-following hedge funds slipped only marginally into negative territory in June, with trading activity in gold and silver largely offsetting losses tied to crude oil, coffee and the Australian dollar, Societe Generale said in a client note on Monday.
The note highlighted that energy market disruption linked to the Iran war has contributed to inflationary pressures and to higher expectations for central bank interest rate hikes. The dynamics are relevant for gold, which is commonly regarded as an inflation hedge but which can underperform when rates rise because it yields no interest and can lose appeal versus interest-bearing assets.
Gold itself fell nearly 12% in June, a move that produced profits for funds that had positioned against the metal. Overall, systematic hedge funds - whose models extend trends until those trends dissipate - posted an average negative return of 0.1% for the month. Even so, the subgroup of trend funds and CTAs remained over 9% higher year-to-date, according to the Societe Generale note.
The note gave further detail on performance drivers across the 78 hedge funds the bank tracks:
- Year-to-date returns across the panel ranged from about +11% to -8%.
- Silver, gold and equities contributed to positive returns for the cohort.
- Losing bets identified in the note included crude oil, heating oil and the Australian dollar.
- Since June 23, trend funds had established new positions that included long exposure to cocoa and short exposure to wheat.
The note also provided specific market moves and implications for these new positions. New York cocoa futures have risen by more than 18% since the end of June, while wheat futures have advanced over 8% in the same period; as a result, short positions in wheat would have produced losses. Societe Generale cited interest-rate positions as the most crowded trades among the strategies it surveyed.
A compact market-statistics line included in the note showed intraday changes across a set of tracked instruments - for example, brief percentage moves were listed for gold, coffee, silver, crude oil, cocoa and wheat, alongside the Australian dollar - underscoring the mixed short-term performance across commodity and FX markets.
In sum, the bank's note painted a picture of trend-following strategies that were only slightly negative for June but still in positive territory for the year, with precious metals and equities acting as partial stabilizers against headwinds from energy, select commodities and the Australian dollar.
Data points and cited moves in the note:
- Gold: down nearly 12% in June.
- Trend funds/CTAs: up over 9% year-to-date.
- Cocoa: more than 18% rise since end of June (New York futures).
- Wheat: over 8% gain since end of June.
- Identified losing bets: crude oil, heating oil, Australian dollar.