Following on from an improvement in February and a strong March, April has been another positive month for CTAs, according to the latest data by Societe Generale (SG) CTA indices. The SG CTA Index was up 2.76% in April, bringing it firmly into positive territory for 2019 year–to–date, to up 4.74%. The strong performance has […]
Tag: managed futures
A new report from RCM Alternatives highlights the struggles of Commodity Trading Advisors (CTAs) in 2018.The report, Managed Futures/Global Macro 2018 Strategy Review, notes that last year was generally a disappointing one for managed futures and global macro across most strategy groups. This is perhaps surprising, given that there were significant sell-offs in the equities markets in 2018, which is when the diversification benefits of having CTAs in the portfolio is supposed to be felt.
As the report explains: “With equities getting hit hard, this was a prime opportunity for CTAs, managed futures and macro to come off the mat and show investors the power of diversification. Instead, the lesson was that sometimes non-correlation does not equal negative correlation, especially in the short term.”
Currency trading was one of the few bright spots for CTA performance last year, according to new data from BarclayHedge, now a division of Backstop Solutions.While the Barclay CTA Index was down 2.85% for 2018, the Currency Traders Index was up 5.1% for the year, and the Discretionary Traders Index gained 2.01%.These, however, were the only two indices to post positive returns for the year.
Indices posting losses on the year were led by the Cryptocurrency Traders Index, which was down 63.24% through December. The MPI Barclay Elite Systematic Traders Index was down 5.12% for the year, the Diversified Traders Index declined 4.71%, the Systematic Traders Index dropped 4.16%, the Fin./Met. Traders Index was down 3.20%, and the Agricultural Traders Index was down 0.27%.
Following a difficult October, CTAs continued to face challenges in November as the SG CTA Index was down 1.09% and the SG Trend Index was down 1.75%. Year-to-date, the SG CTA Index is down 7.18%.
However, the SG Trend Indicator outperformed the Trend Index as it was up 2.51%. This was driven by gains in commodity markets especially from short positions in the energy sector.
Apart from the uplift in commodities, trend following strategies struggled in other sectors with losses in currencies and equities. There were strong reversals against established trends in particular in Australian and New Zealand dollar. Furthermore, trends in bond markets continued to be mixed, as the new upward momentum brought the recent downward trend to an end.
All of Societe Generale’s (SG) CTA indices were down in October and are now in negative territory year-to-date.
The SG CTA Index was down 2.79% and the SG Trend Index was down 4.29%. The short-term and quant macro strategies fared considerably better as the SG STTI Index was down marginally by 0.40%.
Continuing from September’s dip, losses were driven primarily by trend-following strategies, with losses in commodities, equities and bonds.
Commodities were a particular drag on results, with the upwards trend reversing and the oil market losing 1.58%. A number of long equity market positions also reverted, while bond markets rallied against the developing downwards trend, leading to losses in many of these markets.
The flash estimate for the Barclay CTA Index, compiled by BarclayHedge, indicates a 0.19% loss in September. However, currency trading remains the best performing sector this year.
“The US economy continues to strengthen in spite of pervasive trade war fears and continued Fed monetary tightening, while other countries have chosen to keep their rates low,” says Sol Waksman, founder and president of BarclayHedge.
He adds: “These contradictory monetary policies have created unpredictable crosscurrents and trend changes in futures prices.”
Eight of Barclay’s managed futures indices had losses in September, while only one had a gain.
Has trend following had its day as a trading strategy? The Profit & Loss editors go head-to-head on this debate, with managing editor, Colin Lambert arguing that trend following is dead and editor, Galen Stops, arguing the opposite. Which side do you find more persuasive?
Why Trend Following is Dead
The changing nature of markets tells Colin Lambert that trend following as a strategy has had its day…and then there’s the data.
When Galen and I decided to argue our cases over the relative merits of trend following, I immediately thought of amassing mountains of data around moving averages and breakout points. I then reminded myself this is not the way I do things and as such, decided to go the bluster route.
The flash estimate for the Barclay CTA Index, compiled by BarclayHedge, indicates a 0.71% gain in August. Year-to-date, the Index has lost 1.43%.
“Downtrends in agricultural markets, precious metals, and emerging market currencies provided a helpful tailwind for the 70 percent of futures funds that reported a profit in August,” says Sol Waksman, founder and president of BarclayHedge.
Five of Barclay’s managed futures indices had gains in August, while four had losses.
The MPI Barclay Elite Systematic Traders Index enjoyed a 2.81% gain in August. Diversified traders were up up 1.21%, the Systematic Traders Index gained 1.10%, and currency traders added 0.35%.
Following a challenging period in July, CTA performance improved in August as all the indices posted positive performance.
The strong month was led by the uptick in the performance of trend followers, as the Societe Generale (SG) Trend Index was up +3.92%, but all CTA strategies benefitted.
The SG CTA Index was up 2.64% and the SG Short Term Traders Index was up 1.07%.
The SG Trend Indicator was up 4.14% and the key sectors which contributed were commodities, currencies, and equities.
Susan Roberts, product specialist and director of investor relations at Campbell & Company, talks to Galen Stops about how the CTA industry has matured, what purpose these funds are really supposed to fulfill within a portfolio and why performance might be set for an uptick.
Galen Stops: In the research paper, Prospects for CTAs in a Rising Rate Environment: A Refresh, your analysis finds that CTA performance has not historically been interest rate regime dependent. Is this pretty much what you expected the data to tell you when you began working on the paper?