Stockholm (HedgeNordic) β Many trend-following CTAs truly enjoyed the market environment of February, with the SG CTA Trend Index that tracks trend-following strategies advancing 7.4 percent last month through February 24 before shedding some gains in the last two trading days of the month. βItβs truly trend-following at its best now,β Nicolas Mirjolet, the chief executive officer of Swiss CTA Quantica Capital, recently told Bloomberg. βThe environment right now is almost unbelievable in terms of consistency, the strength and persistence of trends that we see across asset classes.β
Many Nordic CTAs also thrived in last monthβs market environment, with Estlander & Partnersβ pure-trend following strategy, Estlander & Partners Alpha Trend program, advancing 8.0 percent in February and its sister Freedom program gaining 7.9 percent. The two vehicles under the umbrella of Stockholm-based CTA specialist RPM Risk & Portfolio Management closely followed suit, with RPM Galaxy gaining 7.9 percent last month and RPM Evolving CTA Fund advancing 5.8 percent. βThere were 20 trading days in February and Evolving was positive in 17 of them and two of the negative days were β as anticipated β the last two trading days when profit-taking and trend reversals often set in,β Mikael Stenbom (pictured), the CEO of RPM, tells HedgeNordic.
βThere were 20 trading days in February and Evolving was positive in 17 of them and two of the negative days were β as anticipated β the last two trading days when profit-taking and trend reversals often set in.β
RPM Evolving CTA Fund, which features among the nominees for the βBest Nordic CTA 2020β award at the upcoming Nordic Hedge Award, invests in a select group of young CTAs in their βEvolving Phase,β the most dynamic and competitive phase of their life-cycle. βWe have 13 CTAs in the portfolio,β says Stenbom. β11 were positive on the month and two were negative,β of which one was short-term and the other one long-term fundamental. The strongest performer made 9.3 percent and the weakest lost 3.9 percent.
βThe strongest performers in Evolving were what we call hybrid trend-followers plus short-term traders, both technical and fundamental.β
βThe strongest performers in Evolving were what we call hybrid trend-followers plus short-term traders, both technical and fundamental,β Stenbom tells HedgeNordic. βHybrid trend-followers are usually quicker to react to (temporary) trend-reversals and generally more nimble than standard trend-followers,β he continues. βWe do not really have any βclassicβ trend-follower in the portfolio, but the ones that come the closest did, of course, well during the month, but lost more than others the last two days of the month.β
βWe do not really have any βclassicβ trend-follower in the portfolio, but the ones that come the closest did, of course, well during the month, but lost more than others the last two days of the month.β
A wide range of positive developments has created a fertile environment for trend-followers in February. βWe believe that we may have entered a new market environment due to several factors,β says Stenbom. Some of these factors include the fiscal stimulus, which has different effects than monetary stimulus, according to Stenbom, βthe vaccine relief, US election uncertainty removed, inflation lurking in the shadows, expectations of huge climate-related investments, expectations of a growth boom when the pandemic is defeated, etc.β
βGalaxyβs performance was even stronger, but the fund keeps just one CTA now and is trading at a higher volatility.β
RPMβs other CTA vehicle, RPM Galaxy, advanced 7.3 percent in February to take its year-to-date performance to 10.3 percent. βGalaxyβs performance was even stronger, but the fund keeps just one CTA now and is trading at a higher volatility,β says Stenbom. βSoft commodities was the sector with the largest profits, followed by metals, energy and stock indices,β he adds. βLosing sectors were VIX and short rates β bonds were actually contributing positively as did FX.β