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CTAs now set for their best year since 2014

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CTAs and trend-following hedge funds remain on track for their best annual performance since 2014’s landmark performance, with managers continuing profit from continued trends across bonds, equities, indices and commodities markets in the run-up to year-end.

Société Générale’s main CTA Index – which charts the daily performances of 20 of the largest CTAs, including funds managed by Man AHL, Graham Capital, Systematica, AQR, and Aspect Capital – remains up more than 9 per cent this year. It ended October on a high, generating 2.56 per cent for the month, though the first week of November has seen it give back 0.72 per cent.

With just two months left until the end of 2021, the index – a key industry benchmark – is on track for its best performance since 2014, a banner year for CTAs which saw the sector advance more than 15 per cent annually.

Meanwhile, trend-following hedge funds, as measured by SocGen’s SG Trend Index, added more than 3 per cent last month, before dipping 1.34 per cent in early November. 

Overall, the benchmark – which comprises the daily returns of 10 of the biggest trend-following hedge funds – is up 12.43 per cent since the start of 2021. The gain, which is roughly double 2020’s 6.28 per cent annual return, is also the index’s largest since 2014’s stellar 19.7 per cent rise.

SocGen indicated that short positioning on bonds’ downward trend, long bets on equity indices during October, and the continued rise across energy markets have fueled the sector’s momentum lately. 
On the flipside, currencies have proven “more challenging” for trend-followers amid inconsistent markets moves, aside from the yen’s weakening against the dollar.

Overall, some 90 per cent of all the individual CTAs in the SocGen CTA Index and SG Trend Index generated positive performances in October, with a number of managers gaining over 5 per cent, SocGen’s data shows.

Elsewhere, the SG Short-Term Traders Index added 1.95 per cent last month, and has stayed roughly flat so far in November, to put its year-to-date returns at 2.19 per cent. Eight out of the ten funds in the index – a performance snapshot of CTAs and global macro managers with 10-day trading windows – were in positive territory in October, with two again gaining more than 5 per cent.

Tom Wrobel, director of capital consulting at Société Générale Prime Services and Clearing in London, noted that many trend-following strategies are comfortably in double-digit territory in the 10-month period since the start of January. 

“The key sectors for CTA performance appear to have been commodities and equities in 2021, but October also highlighted that all asset classes are important, with significant opportunities for trend-followers in bonds, depending on individual model time-frames and portfolio construction approaches,” Wrobel said this week.

“It was encouraging to see shorter-term CTAs also record a positive month, as institutional investor interest in CTAs remains high; and industry reports indicate that alongside multi-strategy funds, CTAs have enjoyed the largest capital inflows among major hedge fund strategies this year,” he added.

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