Key Takeaways
- • The world's top 10 trend-following hedge funds earned an estimated $1.9bn on grain and soybean trades in the first quarter of 2022, according to an investigation by Lighthouse Reports with Greenpeace's Unearthed unit.
- • The top 10 trend-followers made an estimated $9.6bn in total returns across all asset classes in Q1 2022, measured against a portfolio value of $55bn as of September 2021.
- • The grain returns were significantly higher than in the first quarter of any of the previous five years, per the analysis.
- • Trend-following strategies bought wheat and corn contracts heavily before Russia's invasion of Ukraine, according to Peak Research analyst Dave Whitcomb.
- • UN special rapporteur Olivier De Schutter described the profits as "obscene" and argued that speculation is worsening hunger.
Summary
An investigation by Lighthouse Reports, conducted in collaboration with Greenpeace's investigative unit Unearthed, finds that the world's 10 largest trend-following hedge funds generated profits of nearly $2bn from trading grain and soybeans in the period surrounding Russia's invasion of Ukraine. The analysis draws on Société Générale's Trend Index, which tracks the daily returns of the 10 largest trend-following funds, combined with the funds' assets under management and estimates of their commodity weightings. Non-food commodities were excluded from the analysis.
Because the funds report their total portfolio values only once a year, Lighthouse used the September 2021 figure of $55bn and the Trend Index's breakdown of estimated returns by asset class. On that basis, it estimates the top 10 trend-followers made $9.6bn in returns in the first three months of 2022, including $1.9bn on wheat, corn and soybean trades. The report states that the grain and soybean returns were significantly higher than in the first quarter of any of the previous five years.
The funds named in the analysis are Managed Futures Offshore, run by AQR Capital Management; Managed Futures, run by AlphaSimplex Group; Diversified, run by Aspect Capital; BlueTrend, run by Systematica Investments; Tactical Trend A, run by Graham Capital Management; Systematic Trend, run by ISAM; Lynx Bermuda D, run by Lynx Asset Management; Man AHL Alpha, run by Man Investments; DTP Enhanced Risk, run by Transtrend BV; and Winton Trend, run by Winton Capital. The funds use algorithmic trend-following techniques that automatically buy or sell derivatives in response to rising or falling prices.
Olivier De Schutter, co-chair of the International Panel of Experts on Sustainable Food Systems and UN special rapporteur on extreme poverty and human rights, said hedge funds and financial speculators had "made obscene profits by betting on hunger and exacerbating it." He argued that financial investors moved into grains and commodities in large numbers at the start of the war, seeking to profit from uncertainty and rising food prices. Dave Whitcomb, an analyst at trading consultancy Peak Research, said trend followers began buying wheat and corn contracts heavily in the weeks before the invasion, as Russian troops massed on the Ukrainian border, and bought on upward momentum into early February and March 2022.
The Guardian separately reported the findings as the top 10 hedge funds making a £1.5bn profit from the Ukraine war food price spike. The investigation raises questions about the role of speculators in food price inflation during a global cost-of-living crisis.
Because the funds report their total portfolio values only once a year, Lighthouse used the September 2021 figure of $55bn and the Trend Index's breakdown of estimated returns by asset class. On that basis, it estimates the top 10 trend-followers made $9.6bn in returns in the first three months of 2022, including $1.9bn on wheat, corn and soybean trades. The report states that the grain and soybean returns were significantly higher than in the first quarter of any of the previous five years.
The funds named in the analysis are Managed Futures Offshore, run by AQR Capital Management; Managed Futures, run by AlphaSimplex Group; Diversified, run by Aspect Capital; BlueTrend, run by Systematica Investments; Tactical Trend A, run by Graham Capital Management; Systematic Trend, run by ISAM; Lynx Bermuda D, run by Lynx Asset Management; Man AHL Alpha, run by Man Investments; DTP Enhanced Risk, run by Transtrend BV; and Winton Trend, run by Winton Capital. The funds use algorithmic trend-following techniques that automatically buy or sell derivatives in response to rising or falling prices.
Olivier De Schutter, co-chair of the International Panel of Experts on Sustainable Food Systems and UN special rapporteur on extreme poverty and human rights, said hedge funds and financial speculators had "made obscene profits by betting on hunger and exacerbating it." He argued that financial investors moved into grains and commodities in large numbers at the start of the war, seeking to profit from uncertainty and rising food prices. Dave Whitcomb, an analyst at trading consultancy Peak Research, said trend followers began buying wheat and corn contracts heavily in the weeks before the invasion, as Russian troops massed on the Ukrainian border, and bought on upward momentum into early February and March 2022.
The Guardian separately reported the findings as the top 10 hedge funds making a £1.5bn profit from the Ukraine war food price spike. The investigation raises questions about the role of speculators in food price inflation during a global cost-of-living crisis.
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