- Advertisement -

Related

CTAs more than just a tail risk hedge – Bornemann

- Advertisement -

Stockholm (HedgeNordic) – In a recent interview with Citywire, Hans-Olov Bornemann (pictured), who is heading the quant team behind the SEB Asset Selection Fund, explained why CTAs are more than just a tail risk hedge and that the strategy has fared well also in upward sloping markets.

“CTAs do perform very well in volatile markets, or more specifically in negative equity markets. They provide a tail risk hedge, as people refer to. But CTAs can also perform in upward sloping markets, like they did in 2014 and in the beginning of 2015 where we had a very benign market environment and still CTAs managed to perform well”, Bornemann says commenting on when CTAs tend to deliver outsized returns.

Currently, the models that Bornemann run in the SEB Asset Selection managed futures fund point to continued equity market strength.

“What the model is saying today is that we are going to see a continuation of the positive trend in the equity market, but we are also building up bond exposure, a return to more of a quantitative easing type of environment, at least for the near term future. The model is also pointing to a stronger dollar to some extent”.

Over the past 1.5 years, Bornemann points to equities and fixed income markets as having provided for the most significant positive contributions. In the case of fixed income markets, Bornemann says that they have offered good returns over the last 10 years but has seen less trendiness as of late given the pick-up in interest rates “which has caused the model to, at times, be short interest rates”.

Responding to a question on how to think when allocating to CTAs, by many viewed as too complicated to invest their money in, Bornemann says that CTAs play an important role for the balance of a portfolio.

“The reason I am saying that is that CTAs have the possibility to protect the portfolio in very negative markets. Looking back at CTA returns since 1980, the strategy has been able to provide positive returns in the 6 largest equity market drawdowns. You won´t find many investments that have been able to do that”, Bornemann concludes.

See link below for full interview:

http://citywireselector.com/news/aa-rated-quant-head-ctas-are-not-just-for-volatile-markets/a1021849?ref=citywire-global-latest-news-list

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Jonathan Furelid
Jonathan Furelid
Jonathan Furelid is editor and hedge fund analyst at HedgeNordic. Having a background allocating institutional portfolios of systematic strategies at CTA-specialist RPM Risk & Portfolio Management, Mr. Furelid’s focus areas include sytematic macro and CTAs. Jonathan can be reached at: jonathan@hedgenordic.com

Latest Articles

Joakim Hannisdahl Takes His Quantitative Playbook From Shipping to Crypto

Joakim Hannisdahl is best known for his work in the highly cyclical shipping industry. After several years as a sell-side shipping analyst, he moved...

Tidan Capital Launches UCITS Version of NOVA

Swedish multi-strategy boutique Tidan Capital has launched a UCITS version of its NOVA volatility arbitrage strategy, broadening access to the strategy among institutional investors....

Folketrygdfondet on the Enduring Case for 60/40

The traditional 60/40 portfolio, combining the complementary roles of equities and bonds, remains a central reference point in institutional portfolio construction. Few investors have...

Adrigo Moves to Long-Only Approach in New Phase

Staffan Östlin stepped down from his role as portfolio manager of Adrigo Small & Midcap L/S during the summer, with responsibility for the fund...

Insurance Risk as a Source of Portfolio Diversification

HedgeNordic welcomed 15 institutional investors and investment professionals to ILS Day Stockholm, bringing together allocator and manager perspectives on the role of insurance-linked investments...

AP3’s Jonas Thulin: “The 60/40 Portfolio Has Run Its Course”

The 60/40 portfolio was built on a simple premise: equities drive long-term returns while bonds provide stability and diversification. But that relationship is no...

Allocator Interviews

In-Depth: Diversification

- Advertisement -

Voices

Request for Proposal

- Advertisement -