Niederhoffer Capital was down 1.6 percent in August in the flagship strategy according to a shareholder letter obtained by ValueWalk. The Diversified Alpha Program manages $492 million and is now up 12.3 percent YTD after suffering major losses in the last couple of months that essentially wiped out half of its returns. Niederhoffer Capital was also down in two of its other programs; Negative Correlation was down 1.9 percent, whereas Optimal Alpha was down 2.5 percent in the same period. The only fund that was up in this period was iHedge Inflation, which gained 6 percent in August.
Niederhoffer quant strategy
The flagship program continues to lose in its forex trades. Overall, this asset class was down 3 percent in European currencies. The fund was again profitable in U.S. fixed income and boasts the record of having no down month in these trades in this year so far. Niederhoffer, which uses a quant style trading methodology with very short holding periods, notes that positions with holding periods of less than one day did better from Feb-June than in later months, whereas longer holding periods of 1-5 days have returned well in the past months.
The struggling period of CTA/quant funds has been a long one this year; the best and largest funds in this category have shown poor performance. August proved equally difficult for the quant strategies to navigate through as most of them suffered major detractions. However, September brought a much needed up period for trend-following strategies.
Roy Niederhoffer analysis of S&P 500 futures
Roy Niederhoffer analyzed the up and down periods in the S&P 500 futures to see how a rally or decline could affect the equity markets. He notes that while his strategy is focused on toughing out the down periods of the markets, the hedge fund industry currently has an all-time high correlation of 0.88 with the S&P 500 (INDEXSP:.INX), so a move for the worse could topple the returns of many money managers. Niederhoffer says that his funds would do great in an equity market rally in response to the current environment where QE-infinity is underway.
Niederhoffer Capital Management has $516 million under management.