One of the performance-based benchmarks for foreign exchange trading, tracking the performance of several institutional players, the Parker FX Index, is reported to be have increased +0.91 per cent for the month of February.
The index measures both the reported and the risk adjusted returns of global currency managers and is the first index used to analyze unleveraged (risk-adjusted) performance in order to calculate pure currency returns, or manager skill. It tracks the performance that managers have generated from positioning long or short foreign currencies.
From a total of 31 programs in the index, 29 reported their February results, 18 of which reported positive results and with 11 incurring losses.
On a risk-adjusted basis, the index was up +0.42 per cent in February. The median return for the month was +0.26 per cent, while the performance for February ranged from a high of +10.22 per cent to a low of -3.48 per cent.
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As well as the broad Parker FX Index, there are two style driven sub-indices. These include the Parker Systematic Index, which tracks those managers whose decision process is rule based and the Parker Discretionary Index, which tracks managers whose decision process is judgmental. In February, the Systematic Index was up +0.56 per cent and the Discretionary Index was up +1.27 per cent. On a risk-adjusted basis, the Parker Systematic Index was up +0.22 per cent and the Parker Discretionary Index was up +0.97 per cent.
The top three performing constituent programs for the month of February on a reported basis returned +10.22 per cent, +4.89 per cent, and +4.00 per cent, respectively. The top three performers on a risk-adjusted basis returned +7.94 per cent, +3.08 per cent and +2.64 per cent, respectively.
The US dollar fell in February amid decreasing expectations of US rate hikes in the near future. The British pound was also down on continued concerns of a British exit from the EU. Looking ahead, managers believe that the USD will remain favorable as the Federal Reserve continues to raise rates over the long run. Commodity prices and central bank actions are expected to continue to drive currency markets.
The Parker FX Index currently includes 31 programs which manage approximately $40 billion in currency strategy assets. The Index also includes the performance of currency managers who are no longer trading in order to address survivorship bias. Disciplines include technical, fundamental and quantitative methods.