The podcast is back for 2020 and Colin Lambert and Galen Stops immediately try to dampen new year’s spirits with a look at what was a pretty poor 2019 for the FX platforms. On a more positive note, Lambert thinks that 2020 could be a breakout year for two services in the FX industry as […]
Tag: trend following
Despite a slight dip in performance in December, CTAs experienced their best year since 2014, according to data from Societe Generale (SG). Following positive gains in November the SG CTA Index ended December down 0.65%. All of the SG indices closed the year in positive territory, with the SG CTA Index and the Short-Term Traders […]
Amidst a period of poor performance by CTAs, speakers at Forex Network Chicago discussed how these firms should be adapting to a period of sustained low volatility. The panellists all agreed that a large part of the reason why CTA returns have been so low since the financial crisis — with the exception of 2014 […]
2018 saw CTAs cap a generally poor decade of performance with a particularly bad year of losses. Given this, Galen Stops takes a look at whether the rationale for investors including CTA strategies in their portfolio is still valid. Post financial crisis, CTAs have struggled to produce returns, with only 2010 and 2014 standing out […]
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?
Following an initial positive run in the first few days of the year, all CTAs in the Societe Generale (SG) Indices were in negative territory by the end of January. The SG Trend Index was down 3.25% and the SG Short-Term Traders Index was down 1.71%. The SG CTA Index returned -1.99% despite being helped slightly by three non-trend following managers’ positive performances during the month.The SG Trend Indicator attributed losses to equity markets and currencies. They were positioned short in risk assets, hence equity markets’ reversal and gains in one of their best Januarys ever, contributed to losses of 3.91% at the portfolio level.
It’s the end of year It’s the end of year special podcast and Colin Lambert and Galen Stops are in jovial mood as they bring the curtain down on another busy year in the FICC industry. Listen in as they each identify a key theme from the past year and look to re-assess them with the benefit of hindsight, before moving into less certain territory by providing a price prediction for everyones favourite out-of-control child, Bitcoin.
They also – this being the season of making a wish, share their one hope for 2019, although one of them (Lambert of course) appears to have forgotten it’s the season of goodwill!
In a sensational end to the year’s podcasts, Lambert also reveals that yes, he did indeed quote from the film Love Actually in a podcast earlier this year, but he tries (and fails) to make amends by setting listeners another teaser by paraphrasing from a much more acceptable movie…in his mind at least!
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.
This is a pretty horrible time for CTAs, not only because of the sector’s very visible performance issues, but because it’s even worse than the numbers suggest. After all, the big selling point for CTAs has always been they are a good hedge in falling equity markets – but they clearly have not been this year. It may not be all doom and gloom, however, for using new technologies and techniques they have the opportunity to re-engineer their models to meet the challenges of the modern market structure.
This week’s podcast sees Colin Lambert and Galen Stops discuss the latest lawsuit facing banks over their actions in FX markets, during which Lambert invokes the spirit of a film that he can’t remember the name of, by asking, “Could you ask me that question again Galen?”
Stops also has a series of questions relating to the Virtu-ITG tie up reported this week as our two podcasters discuss the evolution of the non-bank trading firm business model. Where do these firms expand? Lambert is fairly confident (is he ever not?) that it is not by buying other trading firms, but both men see opportunities away from trading.
They also discuss volatility in crypto markets and ask – at what stage does the institutional enthusiasm for crypto start to weaken?
This week’s podcast also highlights how Lambert giveth…and taketh away…as it is bookended by praise and ridicule for his colleague! Find out why by listening in to this week’s edition.