CTAs rise to best monthly gain in five years as managed futures hedge funds end 2020 in “spectacular” style

Trend following

Trend-following hedge funds and managed futures strategies enjoyed a storming finish to what was ultimately a turbulent and unpredictable year for the sector, with Société Générale’s CTA indices ending 2020 in positive territory following strong December performances.

SocGen’s main SG CTA Index notched up its best monthly return in more than five years, advancing 5.54 per cent in December. The gain put the index – a daily snapshot of a select pool of 20 of the largest managed futures strategies – up 3.12 per cent annually for 2020.

All 20 of the CTA Index constituents recorded positive performance, with trend-following strategies leading the pack, SocGen said on Wednesday. Returns ranged between 1 per cent and 16 per cent across all trend, non-trend, and short-term strategies.

“CTAs closed an extraordinary year in spectacular fashion, cementing gains across all different CTA strategies in 2020, and answering critics’ questions whether trend-following was again ‘dead’ in a year full of uncertainty,” said Tom Wrobel, director of capital consulting, Société Générale Prime Services and Clearing.

Trend-following hedge funds, as measured by the SG Trend Index, also surged in the final month of the year, leading the way with a 6.55 per cent gain.  The benchmark – an equally-weighted barometer of the largest 10 trend-following CTAs’ performances – finished the year up 6.24 per cent.

SocGen observed that while almost all short-term CTA returns were positive for the month, they recorded “a lower magnitude of performance” than trend-following funds.

Meanwhile, Société Générale’s Short-Term Traders Index, which tracks daily returns for CTAs and global macro managers with 10-day trading windows, returned around 3 per cent for the year, having generated a 0.62 per cent rise in December.

December’s market moves favoured CTA strategies, as managers took profits across commodities, currencies and equity indices.

Specifically, US dollar weakness trends underpinned the advance with continued strength in all major currencies against the US dollar, and a continuation of the upwards momentum in stock markets. Meanwhile, strong trends across agricultural and energy markets aided commodities indices.

Wrobel said: “Performance in December came from a variety of different strategies and asset classes, typifying the rich variety in the CTA industry, and justifying the continued institutional investor belief that CTAs have a place in a truly diversified portfolio.”

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