CTA returns remain sluggish following “challenging” August

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Tom Wrobel, Societe Generale

CTAs and trend-following hedge fund strategies have experienced a sluggish start to September, having had a disappointing August in what Société Générale describes as a “challenging environment” for the sector.

SocGen’s main broad-based SG CTA Index – which measures the performance of a pool of 20 of the largest CTAs providing daily returns – finished August in slightly negative territory, down 0.29 per cent.

That lukewarm showing continued into September, with the benchmark notching up just 0.17 per cent since the start of the month, while year-to-date returns have reached 6.69 per cent.

SocGen suggested that sustained upward trends in stock markets – US equities indices have hit all-time highs in recent weeks – have bolstered managed futures’ long positions, but these were offset by sideways moves in bonds and commodities, which ultimately dented portfolio performance.

Just six out of 20 managers comprising the SG CTA Index registered positive returns, of which only one was a non-trend based CTA, while trend-followers which were split half-positive and half-negative, ranging from -2.0 per cent to +3.5 per cent, SocGen data shows.

Meanwhile, shorter-term CTAs faltered in August, sliding 1.33 per cent – their second worst month this year - before continuing to fall some 0.22 per cent in September. Year-to-date, the SG Short-Term Traders Index – a daily returns snapshot of CTAs and global macro managers with 10-day trading windows – remain in marginally negative territory, down -0.04 per cent.

Eight out of the 10 individual short-term CTA managers which make up the index posted negative performance in August, with only small gains from the remaining two, SocGen noted.

Meanwhile, trend-following hedge funds’ performance - as measured by the SG Trend Index, which tracks the daily net returns of a pool of 10 of the biggest trend-following managers – have fared slightly better. The benchmark has risen 0.31 per cent so far this month, which followed a monthly return for August of 0.44 per cent, bringing it to 8.84 per cent since the start of the year.

Tom Wrobel, director of capital consulting at Societe Generale Prime Services and Clearing in London, said CTAs have delivered “robust performance” so far this year and continue to gain traction with institutional investors.

“The month of August provided a slightly more challenging environment for many CTAs, but opportunities were still present across different markets and time frames, and positive performance from selected CTA managers is testament to the broad spectrum of CTA strategies which exist and their multi-asset approach,” Wrobel said.

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