Analysis-Cocoa rally and market tumult hoist systematic hedge funds ahead of their peers

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Record cocoa prices and markets whipped around by inflation and geopolitics helped hedge funds using systematic strategies outperform their peers in the...

LONDON - Record cocoa prices and markets whipped around by inflation and geopolitics helped hedge funds using systematic strategies outperform their peers in the first quarter, according to industry players and investors.

Commodity markets have also been mixed, but the consistency of cocoa's sustained rally to record highs has been a bonus for systematic hedge funds. In Europe, for example, aerospace and defence stocks have rallied almost 28% so far this year, while utilities stocks have fallen about 7%.These use different volatility thresholds to decide when trades become so risky they should be ditched.

It also benefited from short bets against carbon emission permits, actively traded by companies needing to pay for carbon dioxide they emit, alongside speculators betting on their value.

 

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