- Advertisement -
- Advertisement -

AIMA Highlights Benefits of CTAs

- Advertisement -

Stockholm (HedgeNordic) – Fresh research shows that investor portfolios containing managed futures funds perform better and exhibit less risk than those without them. Despite occasionally experiencing periods of underperformance, managed futures funds can provide competitive risk-adjusted and non-correlated returns coupled with limited drawdowns.

Managed futures strategies represent one of the main alternative investment strategies, accounting for roughly $340 billion in total AUM. Even though the CTA industry has been dominated by systematic trend following, all sub-investment strategies in the space have one common feature: they aim to generate absolute returns through active trading in global futures (and foreign exchange) markets.

In an educational paper titled “Riding the Wave,” the Alternative Investment Management Association – the global representative of alternative investment managers – together with Société Générale explain the role CTAs play in investor portfolios, as well as attempt to help investors make better informed decisions about the CTA sector.

AIMA and Societe Generale show that the performance of a traditional 60/40 portfolio, which has a 60% exposure to equity markets and a 40% exposure to bonds, can be enhanced with the addition of CTA strategies. Specifically, capital allocation to CTAs can increase returns and risk-adjusted returns (due to lower volatility), as well as considerably lower and shorten drawdowns. The paper shows that the largest drawdown, or the peak-to-trough decline, for CTAs since 2000 was less than one-fourth of the scale of the largest drawdown for global equities (-11.63% versus -53.65%).

Managed futures strategies perform particularly well relative to other asset classes in times of market stress. In times of market crisis, market participants become synchronised in their actions, which favours trend-following strategies. For instance, all CTAs in the managed futures database maintained by Société Générale reported positive returns in 2008, with many of those CTAs returning in excess of 30%. For another example, the CTAs included in the Nordic Hedge Index (NHX) returned 16.15% on average in 2008. Most importantly, AIMA and Société Générale find evidence that CTAs are normally able to benefit from having a positive correlation with equity markets in bull markets, and having a negative correlation in bear markets.

According to AIMA CEO Jack Inglis, the educational paper is designed to “help investors better understand managed futures and will go some way to dispel the idea that they are black boxes that can’t be understood.” To view the paper, please click below:


Picture: (c) Nata-Lia—shutterstock.com

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

Our newsletter is sent once a week, every Friday.

Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

Latest Articles

Rhenman & Partners Bolsters Operational Team

Stockholm (HedgeNordic) – Rhenman & Partners Asset Management is further strengthening its operational team following the appointment of Teresa Isele as CEO at the...

ISEC Can Offer the RAIF

Stockholm (HedgeNordic) – ISEC Services, a Swedish firm offering third-party management company services, can provide the increasingly popular Luxembourg fund structure, the Reserved Alternative...

Nowo and QQM Pave the Way for Real Estate Investing

Stockholm (HedgeNordic) – A Swedish property development company is forging a partnership with fintech firm Nowonomics and its wholly-owned asset management arm, QQM Fund...

Atlant’s Stability “Runs Like a Clock”

Stockholm (HedgeNordic) – In the ever-changing hedge fund landscape with a constant flow of launches and closures, some long-running hedge funds keep getting more...

Visio Siilo to Cease Operations Amid Erratic Dislocations

Stockholm (HedgeNordic) – After an extensive career spanning both allocator and fund manager roles, Mikael Simonsen joined Visio Asset Management in late 2021 to...

The Foundation of the Energy Transition: Industrial Commodities

By Bentley Atteberry, CEO, CIO, Director of Metals – Myst Capital: The world is in the early stages of one of the largest economic...

Allocator Interviews


Most Popular This Week


Request for Proposal

- Advertisement -