In the FICC of it

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This week’s podcast opens with Galen Stops gloating over Colin Lambert because CTAs – and in particular ones using trend following strategies – are (finally!) producing some positive returns. One swallow doesn’t make a summer, argues Lambert, but Stops is convinced that this is the beginning of an upswing for these hedge funds. This leads into a more serious discussion about some the challenges facing CTAs when their trend following models aren’t working. For example, do they alter their models to improve returns at the risk of diluting their potency as a diversifier within investors’ portfolios?

The pair then discuss a recent whitepaper published by Citi, in which the bank outlines a new pricing model for its FX prime brokerage (FXPB) business going forward. Stops highlights what he thinks will be the key challenge in implementing this model, while Lambert says that he can see the sense in what is being proposed, but adds that it’s still a brave move being taken by the bank.

The conversation then turns to why there is a distinct air of optimism around bank e-FX desks at the moment and the answer is simple – it’s all about the money! Lambert compares and contrasts the mood on the e-FX side of the firms to previous years and says that this might be the most positive he’s seen these teams since the financial crisis. One symptom of all this is that innovation and new products are once again back on the menu, and this is highlighted by some of the recent algo launches that Stops and Lambert take a look at. But, as ever, Lambert’s natural cynicism comes through as he argues that it’s still the case that little of what is being launched is really new…

Click on the links below for more on the stories discusses this week:

CTA Performance Improves as Trends Return to Markets

Citi Report Advocates New FXPB Pricing Model

New Goldman Sachs Algo Offers Basket FX Trading

Barclays Launches New Algo

This week's podcast opens with Galen Stops gloating over Colin Lambert because CTAs - and in particular ones using trend following strategies - are (finally!) producing some positive returns. One swallow doesn't make a summer, argues Lambert, but Stops is convinced that this is the beginning of an upswing for these hedge funds. This leads into a more serious discussion about some the challenges facing CTAs when their trend following models aren't working. For example, do they alter their models to improve returns at the risk of diluting their potency as a diversifier within investors' portfolios?

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Galen Stops

Galen Stops