Source: Venn by Two Sigma. The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using monthly data for the period March 1995 - April 2021.


Market Themes & Factor Performance Summary

  • Global Equity markets rallied in April, supported in part by strong corporate earnings and signs of a robust economic recovery, especially in the U.S. (U.S. equity indices outperformed the global market, resulting in positive returns for the Local Equity factor in the USD version of the factor lens). COVID cases surged in Brazil and India, dampening some of the investor optimism and hurting the Emerging Markets factor.1
  • Commodities were up across the board in April, with the Bloomberg Commodity Index returning 8.3%. After accounting for the weaker USD and the index’s positive relationship with global equity markets (which also gained in April, as noted in the Equity bullet above), the residualized Commodities factor delivered 3.3% gains. 
    • Copper in particular was among the best performers, up around 12% and hitting its highest level in more than a decade.2
  • The Foreign Currency factor in the USD version of the factor lens benefitted, as the USD fell against its G10 peers, interrupting a USD rally so far this year. The USD pulled back at least in part driven by the Federal Reserve’s messaging that they do not plan to raise interest rates despite the strengthening growth outlook for the U.S.3
  • In terms of the equity style factors, the Crowding factor experienced one of its best months, as stocks that were heavily shorted by the hedge fund community underperformed stocks that weren’t shorted as much.
    • Since the factor reached a -5.8% trough on January 27th, it has delivered 5.0% returns through April 30th, recouping about 86% of the losses (read our January 2021 report for more information on the factor’s drawdown earlier this year).
  • All macro style factors experienced notable performance in April compared to their long-term monthly averages:
    • Trend Following was the best performing factor last month. Following trends in all asset categories, except for fixed income, generated positive returns. Commodities trend following performed the best though, posting 3.7% returns. In the 1 year and 6 months leading up to April, the Bloomberg Commodity Index returned 35% and 18%, respectively. The Trend Following factor was therefore generally long commodities, which outperformed last month, as mentioned in the Commodities factor bullet earlier.
    • Despite global sovereign bonds ending the month flat (as evidenced by the 0.0% return for the Interest Rates factor), the Fixed Income Carry factor, which seeks to benefit from interest rate differentials among six countries by going long and short their 10-year government bond futures, was able to earn 2.6%. Higher-yielding government bonds in Canada, the U.S., and Australia outperformed their lower-yielding counterparts in Japan, the U.K., and the E.U.
    • The Foreign Exchange Carry factor was the worst performer last month. High-yielding currencies, such as the USD, GBP, and AUD underperformed their lower-yielding peers, such as the CHF and EUR. The following table details the currency positioning of the factor during April alongside the demeaned performance of the currencies. The rows in red represent losing positions for the factor last month. 

    • While the underlying CBOE PutWrite Index for the Equity Short Volatility factor posted 1.0% returns, as U.S. equity market volatility slightly dropped in April,4 the residualization to Equity brought the overall factor negative. The factor does well when equity markets are range-bound, and it tends to struggle in periods of large up or down equity moves.

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References to the Two Sigma Factor Lens and other Venn methodologies are qualified in their entirety by the applicable documentation on Venn.



The MSCI Emerging Markets Index, one of the Emerging Markets factor’s three components, underperformed the global Equity factor by approximately 1.3% in April.





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