By Nell Mackenzie
LONDON, July 13 (Reuters) – Trend-following hedge funds edged only slightly into negative territory in June, as trades in gold and silver mostly offset losses in crude oil, coffee and the Australian dollar, Societe Generale said in a note seen by Reuters on Monday.
Energy disruption as a result of the Iran war has driven inflationary pressures and raised expectations for interest rate hikes by central banks.
Gold is often viewed as a hedge against inflation, but because it bears no yield it tends to weaken in times of higher rates when it can lose out to interest-bearing assets. Gold fell nearly 12% in June, delivering a profit to any funds that had bet against it.
Systematic hedge funds, whose algorithms ride market trends until they peter out, delivered an average negative return of 0.1% in June, but trend funds and commodity trading advisers, or CTAs, were still up over 9% for the year, according to the Societe Generale client note.
Here’s what the note said of these traders’ returns:
• For the year so far, fund returns ranged from around a positive 11% to an 8% negative return on investment across 78 hedge funds tracked by the French bank.
• Silver, gold, and equities added to positive returns for the cohort.
• Losing bets included crude oil, heating oil and the Australian dollar, the note said.
• New positions that trend funds had piled into since June 23 included long bets on cocoa and short wagers – those that assume prices will fall – in wheat.
• Since the end of June, New York cocoa futures have risen over 18%, while wheat has gained over 8%, meaning any short positions would have lost money.
• The most crowded trades were in interest rates, according to data cited in the note.
(Reporting by Nell Mackenzie; Editing by Amanda Cooper and Barbara Lewis)
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