Executive Summary
June 2025 delivered another quietly positive month for the QIS universe. The average composite advanced ≈ +0.16 % month-to-date, extending Q2’s rebound. Cross-sectional dispersion widened modestly to ~6 percentage points but stayed far below April’s extremes. Leadership pivoted decisively toward short-volatility carry trades in rates and equities, while defensive equity factors (low-vol, quality) and FX value themes lagged.
Market Context
Risk appetite strengthened materially in June:
-
Global equities surged to record highs—MSCI World +5 %—as hopes for a lasting U.S.–China trade détente, AI-led earnings and policy support lifted sentiment.
-
Credit spreads tightened (IG to ~83 bp; HY to ~290 bp) and the VIX drifted into the mid-teens, highlighting a sharp volatility crush.
-
Bond yields eased in the U.S. on nascent Fed-cut expectations, while the U.S. dollar slid to multi-year lows.
-
Oil prices fell toward $68/bbl as geopolitical risk premia evaporated; gold and industrial metals gave back early gains.
This “risk-on, low-vol” backdrop neatly frames June’s QIS results: carry and credit momentum thrived on tighter spreads and lower vol, whereas defensive low-vol factors and FX value/EM liquidity plays struggled.
Top- and Bottom-Five Composites (MTD)
Top performers
-
Rates Short-Volatility (+2.83 %) – vol crush plus theta harvest as Treasury yields settled near 4.3 %.
-
Equities Short-Volatility (+2.34 %) – option-carry benefitted from VIX in the mid-teens and surging underlying indices.
-
Credit Momentum (+1.73 %) – rode the continuation of spread tightening across IG and HY.
-
Credit Carry (+1.59 %) – coupon-and-roll boosted by heavy new-issue demand.
-
Credit Value (+1.57 %) – mean-reversion in lagging BBB paper amid broad risk appetite.
Bottom performers
-
Equity Low-Volatility (-3.16 %) – investors rotated into higher-beta cyclicals during the equity rally.
-
FX Value (-2.82 %) – dollar weakness stalled, several EM crosses reversed, diminishing valuation spreads.
-
Equity Quality (-2.36 %) – premium compressed as the market chased growth and turnaround names.
-
FX Liquidity (-2.06 %) – wider intraday spreads in thin EM pairs amid whippy USD price action.
-
Commodities Short-Volatility (-1.40 %) – crude-option gamma spike on supply headlines dented carry.
Average Performance by Thematic Bucket
-
Carry (+0.70 %) – strongest bucket again; lower vol and tighter credit spreads boosted option- and bond-carry trades.
-
Momentum (+0.47 %) – credit and commodity trends extended as risk assets climbed.
-
Value (+0.36 %) – fourth straight gain, thanks to credit mean-reversion; equity and FX value were mixed.
-
Liquidity (-0.11 %) – slight drag; bid-ask spreads widened for some EM FX pairs despite calmer core markets.
-
Factor (-0.32 %) – equity low-vol & quality reversed in the powerful equity rally, outweighing growth gains.
-
Hedging (-0.38 %) – long-vol overlays lost premium in a collapsing-VIX environment.
Average Performance by Asset Class
-
Credit (+1.06 %) – spread tightening and robust primary flow powered value, momentum and carry sleeves.
-
Rates (+0.80 %) – income from short-vol carry dominated as Treasury vol compressed.
-
Commodities (-0.01 %) – carry gains offset by short-vol losses tied to oil’s sharp drop.
-
Equities (-0.08 %) – growth-momentum helped, but low-vol and quality reversals pulled the aggregate marginally negative amid the 5–6 % index rally.
-
FX (-0.26 %) – dollar consolidation and choppy EM moves hit value and liquidity sleeves.
Conclusion
June’s buoyant risk backdrop—record equity highs, tighter credit spreads and a collapsing VIX—favoured short-volatility carry and credit value/momentum strategies, while defensive equity factors, FX value and volatility hedges under-performed. Dispersion is moderate and bucket correlations remain low, so pairing income-oriented carry with selective value and trend exposure—while sizing hedges strictly for tail protection—remains the prudent play as we enter H2 2025.
