The CTA sub-index within the Nordic Hedge Index staged a meaningful recovery in the second half of 2025, rising 4.1 percent, including a 1.1 percent advance in December alone. However, the late-year rebound was not sufficient to offset earlier losses, and the sub-index finished the year down 2.4 percent. December once again highlighted the dispersion across CTA strategies and managers, with performance varying notably across sub-strategies.

Time series momentum (TSMOM), as measured by RPM’s Market Divergence Index (MDI), rebounded notably in December, rising above long-term average levels for the first time in 2025, mainly driven by continuing trends in precious metals and stock indices. In equities, U.S. stocks initially rallied on interest rate cut hopes, expectations that were ultimately fulfilled, before renewed concerns about AI-valuations dragged indices lower. Lower-than-expected inflation provided significant support towards the end of the year. 

In fixed income and foreign exchange markets, Treasury yields and the U.S. dollar moved lower throughout the month following the Federal Reserve’s long-awaited rate cut and lower-than-expected inflation readings. As has often been the case in 2025, the main action was in commodity markets. Within metals, gold and silver hit record highs on bets on further Fed rate cuts and on geopolitical tensions amid a U.S. blockade on Venezuelan oil. In energies, however, crude oil futures remained volatile with geopolitical themes around Venezuela and Russia-Ukraine providing upside pressure, while underlying concerns about oversupply kept sentiment bearish.

In softs, beef prices also set new record highs, driven by tight cattle supplies (smallest U.S. herds since the 1950s) and strong consumer demand. However, soybean prices declined significantly and unexpectedly, primarily driven by favorable weather and record production forecasts in South America, weak U.S. export sales to China, and year-end technical selling. The cryptocurrency market experienced sustained bearish pressures attributed to weak demand, negative ETF flows, and the relative appeal of traditional assets.

Sub-Strategies and Constituents in the NHX CTA Index

Performance among trend-following managers in the Nordic Hedge Index was mixed during December. Estlander & Partners Alpha Trend, Lynx, and SEB Asset Selection posted gains, primarily driven by exposure to precious metals and equity indices. By contrast, commodity-focused Calculo Evolution Fund, renamed Calculo Terra, and Mandatum Managed Futures Fund ended the month in negative territory.

Beyond traditional trend-followers, the broader CTA sub-index constituents also delivered mixed results. Short-term-oriented Epoque ended the year strongly, with December contributing meaningfully to performance, while machine learning-driven Lynx Constellation also finished the month in positive territory.

Within the macro-oriented segment, Estlander & Partners Freedom and Lynx Systematic Macro experienced sharply contrasting outcomes, with Freedom delivering strong gains while Lynx Systematic Macro faced a more challenging month. Volt Diversified Alpha Fund, combining trend-following and macro strategies, recorded a solid December. Meanwhile, RPM Evolving CTA Fund posted a marginal decline as losses in soft commodities offset gains in metals and equities across its underlying managers.

Outlook

Macro uncertainty remains elevated, but so far, the U.S. economy has been once again surprised to the upside. Furthermore, a seemingly tamed U.S. inflation backdrop gives the Fed room for more rate cuts, even if no move is currently expected in January. Accordingly, market trendiness has shown tentative signs of recovery heading into the new year.