Key Takeaways
- • Blue Sky Dynamic Macro Strategy ranked among the top 20 CTAs in the BarclayHedge database as of March 2016, with a five-year compound annual return of 10.2%, outperforming its RBA cash rate +6-10% target with annualized returns of 12.2% since inception in 2007.
- • The strategy employs three distinct approaches—trend following, mean reversion, and risk premium—designed to deliver "crisis alpha" through negative equity correlation and demonstrated resilience during market dislocations in 2008, 2011, 2014, and early 2016.
- • Blue Sky has achieved a Sharpe ratio of 0.67 since inception against a targeted range of 0.4-0.6, with a 16% volatility target, positioning the fund as a portfolio diversifier rather than a standalone investment vehicle for institutional allocators.
- • The strategy's diversification benefits extend beyond traditional CTA peer groups, offering consistent positive returns during equity bear markets and protective characteristics during market stress periods while avoiding asset erosion during recovery phases.
Summary
Blue Sky Dynamic Macro Strategy represents a notable Australian contribution to the global CTA landscape, demonstrating consistent outperformance relative to both peer benchmarks and stated return targets. Operating since November 2007, the strategy had achieved a five-year compound annual return of 10.2% as of March 2016, positioning it among the top 20 managers in the BarclayHedge database—a database renowned for comprehensive CTA coverage and calculation services for Societe Generale Prime Services CTA performance indices. Since inception, annualized returns reached 12.2% in Australian dollars, exceeding the fund's stated objective of delivering RBA cash rates plus 6-10% per annum.
The strategy's risk-adjusted performance has proven robust relative to target parameters. With a Sharpe ratio of 0.67 since inception—above the anticipated range of 0.4-0.6 derived from the 16% volatility target—Blue Sky delivers consistent risk-adjusted returns. However, the fund's primary value proposition centers on portfolio diversification characteristics rather than standalone performance metrics. As articulated by Neil Power, Head of Blue Sky Hedge Funds, the strategy functions as "a classic diversifier and a true hedge fund," explicitly designed to deliver negative equity correlation and crisis alpha during market dislocations.
Blue Sky's multi-strategy approach combines trend following, mean reversion, and risk premium strategies to achieve its diversification objectives. The fund demonstrated this defensive positioning through positive returns during significant equity market stress periods, including 2008 and 2011, as well as in 2014 and early 2016. Power emphasizes that Blue Sky's performance during equity crises reflects deliberate portfolio construction rather than coincidental timing, with the fund consistently delivering strong returns when equity markets deteriorate while avoiding the asset erosion that plagues some macro strategies during recovery phases. This dual characteristic—providing crisis protection while participating in normal market environments—positions Blue Sky as a portfolio-level hedge for institutional investors seeking to reduce systematic equity market risk without sacrificing long-term capital growth.
The strategy's risk-adjusted performance has proven robust relative to target parameters. With a Sharpe ratio of 0.67 since inception—above the anticipated range of 0.4-0.6 derived from the 16% volatility target—Blue Sky delivers consistent risk-adjusted returns. However, the fund's primary value proposition centers on portfolio diversification characteristics rather than standalone performance metrics. As articulated by Neil Power, Head of Blue Sky Hedge Funds, the strategy functions as "a classic diversifier and a true hedge fund," explicitly designed to deliver negative equity correlation and crisis alpha during market dislocations.
Blue Sky's multi-strategy approach combines trend following, mean reversion, and risk premium strategies to achieve its diversification objectives. The fund demonstrated this defensive positioning through positive returns during significant equity market stress periods, including 2008 and 2011, as well as in 2014 and early 2016. Power emphasizes that Blue Sky's performance during equity crises reflects deliberate portfolio construction rather than coincidental timing, with the fund consistently delivering strong returns when equity markets deteriorate while avoiding the asset erosion that plagues some macro strategies during recovery phases. This dual characteristic—providing crisis protection while participating in normal market environments—positions Blue Sky as a portfolio-level hedge for institutional investors seeking to reduce systematic equity market risk without sacrificing long-term capital growth.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.