Quantitative hedge funds specialising in trend-following strategies are facing one of their toughest years in decades, as sharp reversals, policy shocks and sideways markets confound the models they rely on to detect and ride sustained price trends, according to a report by The Wall Street Journal.
The report cites data from PivotalPath as revealing that CTAs or managed futures funds were down 9.6% through June, putting them on track for their worst annual performance since at least 1998. That compares poorly to a 4% return for hedge funds overall and a 6.2% gain for the S&P 500, including dividends.
The pain is widespread across the $300bn-plus CTA sector with Man Group, the world’s largest listed hedge fund firm and a pioneer in systematic trading, seeing its flagship AHL Alpha strategy decline 7.8%, while its more esoteric AHL Evolution fund has shed over 10%. Systematica’s BlueTrend meanwhile, is reportedly down 16.7% and Aspect Capital’s flagship fund has lost 14.5%.
The CTA strategy, once lauded for its uncorrelated performance and its standout returns during crisis periods like 2008 (+27%) and 2022, is struggling in today’s markets, where sharp reversals and low-conviction price action are frequent. Inconsistent signals – particularly in bond yields and commodity prices – have left funds exposed to sudden reversals rather than benefiting from sustained directional moves.
In response, Man initiated an intensive internal review this spring, calling 150 quant staff back into the office full-time to work on a confidential “all hands” project aimed at adapting models and execution.
The recent underperformance also comes at a time when discretionary macro and long-short equity strategies are flourishing — up 10.5% and 9.2% year-to-date, respectively, according to PivotalPath.
