Vermillion Asset Management experienced another losing month for its CTA, Viridian, which detracted 3.8 percent in May, the largest monthly decline in this year so far according to a shareholder letter obtained by ValueWalk. The CTA Vermillion manages $1.7 billion and Viridian is down 6.2 percent YTD is 55 percent owned by Carlyle Group LP (NASDAQ:CG) . The commodity markets took another wave of losses as USD strengthened and drove speculative traders out of these assets. The fund believes that with less speculative traders in the commodity markets, Viridian could do better in the future.
Tough Times For Trend Following and CTAs
The HFRX Macro/CTA Index was down 0.95 percent in May as Dow Jones-UBS Commodity Index lost 2.24 percent over the same period. CTAs have continued to lose in June as well, with many large futures traders like Bluetrend Capital, and Winton Capital. Cantab Capital and Aspect Diversified, incurring massive losses month to date. Managed futures’ traders of large hedge funds like, MAN GROUP PLC ORD (LON:EMG)and Brevan Howard did not do any better. The question whether this is an end for trend following has popped up several times over the past weeks as short term trades have started to look more fruitful in volatile markets. According to one analysis, it could become simply impossible to gain from this approach as interest rates start rising.
Vermillion CTA Loses In Ag, Energy, Gains In Metals
Vermillion took losses in its energy and agriculture trades. The fund is looking at a rise in soybean futures prices as supply tightens due to wet weather conditions that delayed plantation. In the past month, the firm lost in its spreads trades in soybean futures.
Vermillion continued to summer in crude oil and natural gas spreads as oil production increased and natgas prices took a dip due to warmer weather. According to weekly data from ICE, net long positions in brent crude futures and options took their largest cut in a year as money managers including hedge funds exited their long positions brent crude, reducing them by 26 percent to 183,653 contracts. Analysts see this rush to exit as a knee-jerk reaction to Fed’s new policy and do not see a sustained cause for alarm as oil prices have already started to recover.
Vermillion’s performing asset class in May was precious metals where it profited from a long in platinum versus short in palladium. The fund also netted gains from falling iron ore prices.
Commodity trades have not done do any better in June, Vermillion could have another painful month. Te HFRX Macro/CTA Index was down 0.33 percent till June 27.