Following a challenging start to the year, CTA indices showed signs of improvement in February, with over half of the constituents in the Societe Generale Trend Index in positive territory for the month.
The SG CTA Index was up by 0.42%, whilst the SG Trend Index was up by 0.81%. Short term strategies struggled and underperformed other strategies, with the SG STTI down by 1.19% for the month.
The SG Trend Indicator attributed February’s positive results to gains in currencies and a selection of commodity markets, as well as trends in interest rate markets.
Long positions in bond markets reverted slightly, leading to small losses, whilst positions in equity markets began to adapt to the renewed upward trend.
“We’ve seen an uptick of performance in February, and we maintain the benefits CTA strategies can have in diversified portfolios. It will be interesting to observe if CTAs can continue this upward trend as we look towards March and the rest of the year,” says Tom Wrobel, director of alternative investments consulting at Societe Generale Prime Services.
A source at another firm that tracks CTA performance says that January and February were always going to be challenging months for CTAs as they were forced to unwind positions from the end of 2018.
“I knew right as of December 30 that there was going to be a short-term problem [for CTAs], because we’d had this volatility spike, it was in the wrong direction and then the natural course was going to be for that vol to contract a bit and the trends to reverse. They actually reversed much more than I thought they would, but the natural course for January and February was always going to be those trends reversing, which hurt [CTAs]. But now, as of March 1, CTAs are back in a neutral stance and so I’m optimistic about performance going forwards,” the source tells Profit & Loss.