The S&P Systematic Global Macro Index – Trending To New Highs

The S&P Systematic Global Macro Index (S&P SGMI) is a trend-following strategy that takes long or short positions in 37 constituent futures across equites, commodities, fixed income, and FX.

In 2020, the S&P SGMI did particularly well during the COVID-19-related drawdowns, finishing March up 11.3%, and closing the year at an all-time high. Thus far in 2021, the index has continued along this path, reaching new highs. As Exhibit 1 shows, the full-year 2020 return was 12.76% and the 2021 return is 11.17% YTD.

Much of the recent positive performance has come from commodities. This mostly occurred during the first quarter of 2020, when downward momentum in energy markets gathered pace, and Q4 2020 and YTD 2021, as vaccine news boosted hopes of an economic recovery and the U.S. dollar weakened.

To highlight the role that commodities played, Exhibit 2 shows the performance of two standalone subindices computed using the same methodology as the S&P SGMI. The first is the S&P Systematic Global Macro Commodities Index (S&P SGMI Commodities; the physical commodity futures component), and the second is the S&P Systematic Global Macro Financials Index (S&P SGMI Financials; the equity, fixed income, and FX components).

Notably, the performance of the S&P SGMI significantly exceeded that of its peers, the SG CTA Index and the SG Trend Index. The SG CTA Index tracks the performance of a pool of commodity trading advisors (CTAs) selected from larger managers that are open to new investment. The SG Trend Index is a subset of the SG CTA Index, and follows traders of trend-following methodologies.

As Exhibit 3 shows, the S&P SGMI outperformed the SG CTA Index and the SG Trend Index by 9.60% and 6.48%, respectively, for the full-year 2020 and by 6.92% and 4.79%, respectively, so far in 2021.

How Does the Index Work?

The S&P SMGI rebalances monthly and the methodology involves two core steps: the position direction decision and the weighting decision.

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