Coquest 40 Index September 2021 Update
The Coquest 40 Index finished September up +0.50%%, bringing YTD performance to +6.73%.
U.S. equities sold off in September, recording the worst month since the height of the pandemic fears in March 2020. Fears of inflation along with central banks indicating policy will not be as accommodative going forward caused yields to rise along the curve. The energy crisis in Europe resulted in natural gas and electricity prices reaching all-time highs as Europe struggles with supply shortages.
Trend-following constituents make up the bulk of the index and finished the month up +0.46% on a weighted average basis, albeit with significant divergence in performance among the constituents. Net long global equities and developed country fixed income detracted from performance while net long energy and U.S. dollar exposure bolstered performance within the trend bucket. The difference in performance was dependent on the managers’ exposure to the respective winning and losing trades.
Systematic non-trend managers included in the index finished down -0.36% on a weighted average basis. Performance was mixed within the systematic non-trend bucket for systematic global macro managers who rely on fundamental data and multi-strategy managers who rely on both fundamental and technical data.
Systematic global macro performance varied as managers with larger exposure to net long U.S. dollar versus long developed equities and fixed income fared better. Managers with larger positions in long global equities and fixed income relative to long U.S. dollar suffered in September. Prospects of central bank tapering and fears of inflation caused equity markets to stumble while market participants took refuge in the U.S. dollar. There was dispersion among multi-strategy manager performance as well.
Managers with larger exposure to the commodity sector, particularly the energy complex, from the long side did well compared to managers with a long bias towards financials. The Foreign Exchange and short-term managers included in the index make up the remaining assets in the Coquest 40 and ended the month of September up +3.17% and +0.01% respectively, with FX managers benefiting significantly from the U.S. dollar rally.
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