Executive Summary
May 2025 proved friendlier to the systematic-strategy universe than the whipsaw seen in April. Aggregate QIS returns finished modestly positive, dispersion compressed to ≈ 5½ percentage points and—crucially—all five major asset classes printed a gain. Style leadership rotated toward value and carry, while volatility-linked hedges gave back premium as market stress faded.
A Quick Look at the Macro Backdrop
Risk sentiment thawed in May:
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Equities rallied worldwide on a 90-day U.S.–China tariff truce, strong AI-driven mega-cap earnings and a broad bounce in Europe and Asia. The MSCI World gained, the S&P 500 and Nasdaq rose smartly, and the STOXX Europe 600 advanced ~4 %.
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Credit spreads retraced April’s widening; both investment-grade and high-yield posted small positive total returns.
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Volatility subsided, with the VIX sliding to the high-teens, while Treasury yields briefly spiked on deficit worries before settling; the U.S. dollar weakened and oil remained soft.
This “risk-on but calmer” mix—higher equity prices, lower cross-asset vol, tighter credit spreads—helps explain several of the QIS patterns discussed below: growth and carry factors resurged, low-volatility and long-volatility strategies lagged, and credit systematic sleeves rebounded.
Top- vs Bottom-Five Composites (MTD)
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FX Intraday Momentum (+3.0 %) – Thrived in the mid-day range expansion accompanying a weaker USD.
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Equity Growth (+2.6 %) – Benefited from the megacap tech rebound and AI optimism.
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Commodities Value (+2.4 %) – Captured relative mis-pricing between beaten-down energy and resilient industrial metals.
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Credit Value (+2.0 %) – Profited from the modest re-tightening in BBB spreads.
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Rates Short-Volatility (+2.0 %) – Monetised premium decay as rates vol fell back after the mid-month yield spike.
Lagging strategies shared a volatility-seeking DNA:
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Commodities Long-Volatility (-2.4 %) – Hurt by crude’s swift rebound and gold’s slower grind higher.
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Equity Low-Volatility (-2.3 %) – Sold off as investors rotated into higher-beta growth names.
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Credit Long-Volatility (-1.2 %), FX Correlation (-1.1 %), Equity Long-Volatility (-0.7 %) – Each surrendered premium as the VIX and cross-asset vol slid.
Average Performance by Thematic Bucket
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Value (+0.9 %) – Still in pole-position; mean-reversion tailwinds across equities, credit and commodities dovetailed with the broader “catch-up” rally in undervalued regions.
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Carry (+0.6 %) – Funding-beta trades flourished amid tighter spreads and a softer dollar.
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Factor (+0.6 %) – Growth’s rebound offset a pullback in defensive low-volatility.
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Momentum (+0.4 %) – Positive but muted; trend signals turned choppy as markets climbed a wall of worry.
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Liquidity (+0.2 %) – Narrower bid-ask spreads delivered a mild boost after April’s spike.
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Hedging (-0.8 %) – Only losing bucket, consistent with the VIX retreat and cross-asset vol compression.
The hierarchy mirrors the macro backdrop—value and carry thrive when risk assets grind higher and vol compresses, while hedging sleeves naturally lag in such conditions.
Average Performance by Asset Class
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Equities (+0.55 %) – Lifted by growth-factor strength in U.S. tech and renewed interest in non-U.S. cyclicals.
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Commodities (+0.50 %) – Value and carry gains outweighed long-vol losses; oil’s mid-month recovery helped relative-value longs.
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Credit (+0.35 %) – Spread tightening aided value and carry; long-vol overlays detracted.
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Rates (+0.17 %) – Short-volatility premium capture offset flat trend models in the whipsawing yield environment.
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FX (+0.11 %) – Dollar weakness favoured value; momentum lagged as several EM pairs mean-reverted.
Relative to year-to-date, May nudged Equities and Commodities further into the black, shaved Credit’s YTD deficit, and left Rates and FX hovering near flat.
Conclusion
A calmer, upward-sloping market landscape favoured valuation and income-oriented systematic trades in May, while volatility-sensitive hedges ceded ground. With dispersion back to average levels and correlations between buckets fading, investors stand to benefit from balanced allocations—especially those pairing value/carry exposures with selective growth and liquidity sleeves—to navigate the early-summer environment.
