Trend following hedge funds enjoy summer surge with best monthly performance this year

Trend following

Trend following hedge fund managers gained ground in July following a patchy first half of 2020, notching up their best monthly performance so far this year by capitalising on soaring gold prices and emerging trends against the US dollar.

As markets moved into the second half of the year, CTAs and managed futures strategies seized on an assortment of uncorrelated markets to reverse June’s disappointing numbers, new performance metrics from Société Générale show.

Trend following strategies posted a 3.07 per cent return last month, according to the SG Trend Index. The benchmark, which tracks the net daily gains of a pool of trend-following hedge fund managers, is now up 2.20 per cent year-to-date, with recent gains reversing June’s 1.73 loss.

SocGen’s main CTA index – a daily performance indicator of a select pool of large managed futures strategies – also generated positive performance last month, adding 2.57 per cent.

The solid monthly showing partly recovered the index’s first half losses – it slumped 2.69 per cent in the first six months of 2020 – with CTAs now up 0.18 per cent on average for the year, according to SocGen’s data.

Meanwhile, short term trend following hedge funds, which were up 2.98 per cent between January and June, continued to rise in July, adding 0.57 per cent. Société Générale’s Short-Term Traders Index, which shows the daily returns for CTAs and global macro managers with 10-day trading windows, has now advanced 3.58 per cent in the seven months to the end of July.

“July was a strong month for CTA performance compared to the last couple of months,” said Alex Hill, director of Alternative Investment Consulting at Société Général Prime Services and Clearing.

In contrast to mixed equity market performances, strong trends against the US dollar and in precious metals like gold and silver during July brought solid returns, he observed.

Long bond positions also contributed to the sector’s rise, with some managers returning high single digits for the month.

“July was a great example of CTAs’ ability to generate strong returns from a wide range of uncorrelated markets,” Hill added.