Robo-traders beat out human traders as oil prices continued to drop in the month of December.
Human traders bet poorly this year when they thought that the price of oil had hit the floor in the middle of 2015 — but the prices of crude continued to drop. The hedge funds that relied on program trading and algorithms fared better than the discretionary funds where a human being is making the actual trade, according to Reuters.
How does energy prop trading firm Vectra Capital handle volatility? Traders has their secrets.
“The main beneficiaries have been the systematic, or trend-following guys,” said Anthony Lawler, head of portfolio management at investor GAM. “The stronger the trend, the bigger the position … Since the middle of 2014, oil’s been trending lower, so that’s quite a long trend. As a result, they have meaningful exposure in energy.”
Lawler was caught off-guard in this mindset when his fund believed that the price of oil, had hit the floor at $40 a barrel earlier this month. Instead it kept falling to around $36 on Tuesday, showing how hard it is for flesh-and-blood traders to get their timing right in a rumor-fuelled market, writes Reuters.
Energy-focused hedge funds have seen revenues climb 3.6 percent while commodity traders lost 2.4 percent in the year to November. According to one report, losses and poor performance have left commodty hedge funds at their lowest levels since 2008.
