Strategy Heat Map by Kettera - April 2021 Edition
In the second quarter of 2025, the commodity markets witnessed a rollercoaster ride, with high volatility and dispersion across sub-sectors influencing their performance, as observed by Kettera Strategies.
The agricultural and industrial sectors showed significant variation in gains and losses, reflecting external factors such as supply chain disruptions, weather conditions, and market sentiment. While some subsectors benefited from underlying demand or supply constraints, others were pressured by macroeconomic factors such as inflation, interest rate policies, and geopolitical events affecting trade dynamics.
Trend following programs remained a central driver of commodity investment performance during this period. However, investors faced considerable challenges navigating the volatility and uneven sector performance. Kettera Strategies' analysis underscores this, with their July 2025 heat map commentary highlighting the mixed performance and the significant challenges faced by trend following strategies.
In the equity markets, most systems caught the strong upward moves in equities, both in North America and Europe. The Eurekahedge Long Short Equities Hedge Fund Index and the Eurekahedge AI Hedge Fund Index, which blend the BarclayHedge Equity Market Neutral Index with Eurekahedge Equity Mkt Neutral Index, also showed positive returns.
The agricultural sector saw significant movement, with long positions in ag commodities and metals continuing to reward those riding impressive upward trends. Copper, for instance, reached a 10-year high in April. Meanwhile, the ratio between soybeans vs corn moved from 2.55 to 2.12, indicating a shift in market dynamics.
The industrial sector also experienced noticeable changes, with Chinese domestic steel prices rising, causing iron ore spot prices to increase over 18%. Precious metals, particularly Silver, added to profits during this period.
Systematic trend followers with meaningful allocations to commodities outperformed those that primarily trade financials. These types of strategies also seemed to navigate the FX markets a bit better than others, particularly in shorter-term positions. The BarclayHedge Currency Traders Index and BTOP FX Traders Index reflect this trend.
It is important to note that the views expressed in this article are not necessarily those of AlphaWeek or its publisher, The Sortino Group. The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index, S&P GSCI Metals & Energy Index, S&P GSCI Ag Commodities Index, and the Barclay Crypto Traders Index are other indices that provide insights into the performance of various commodity markets.
In conclusion, the Q2 2025 commodity markets were characterised by high volatility and sector dispersion, with trend following programs remaining a central driver of investment performance. Investors must navigate these challenges to capitalise on the opportunities presented by these markets.
- Despite the challenges in navigating the volatility and sector performance in Q2 2025 commodity markets, systematic trend followers who had meaningful allocations to technology-related sectors, like investing in Silicon Valley stocks or emerging tech startups, could potentially reap significant rewards due to the rapid advancements and innovations in the tech industry.
- With sports becoming an increasingly lucrative sector for investment, some trend following strategies could also consider diversifying into the sports finance industry, focusing on sports teams, leagues, and events that show potential for growth, like esports or crypto-based sports platforms, to capitalize on the continuous evolution of the sports industry landscape.
