On the surface, Morten Christensen, Chief Financial Officer at Norwegian family office Aars, and Jonas Thulin, Chief Investment Officer at Sweden’s AP3, may appear to have little in common. Beneath that surface, however, both share a clear appreciation for liquidity, cost efficiency, and transparency. These considerations have led both investors to view trend-following CTAs in an ETF format as useful tools within their portfolios.

Embedding Trend Within a Total Portfolio Approach

As a proponent and practitioner of the Total Portfolio Approach (TPA), which focuses on managing total portfolio risk and return rather than allocating capital across siloed asset class buckets, Thulin has, in effect, embedded a “trend” framework into AP3’s investment process. “We have been doing trend-following, depending on how you slice and dice what is trend-following and what is not,” says Thulin. “If we are successful with our dynamic market approach, we should be able to identify when a trend ends, when to exit, and when to underweight, overweight, or even go against it,” he explains. “In that sense, we are adopting a relatively simple version of what CTAs do, but internally.”

“If we are successful with our dynamic market approach, we should be able to identify when a trend ends, when to exit, and when to underweight, overweight, or even go against it. In that sense, we are adopting a relatively simple version of what CTAs do, but internally.”

Jonas Thulin, Chief Investment Officer at AP3.

However, Thulin’s portfolio construction framework still leaves room for allocating capital to external trend-following strategies, including CTA ETFs. “At AP3, we run thousands of risk models to dynamically map markets and anticipate potential shifts to essentially look around the corner,” explains Thulin. “But there are situations where we identify something ahead, yet remain fully invested, are unable to exit quickly, or deliberately maintain long-term positions while needing to adjust tactically in the short term.”

In such cases, external exposures can play a role. CTA and other alternative ETFs provide a practical way to complement the in-house process. “Sometimes we need help allocating capital more efficiently into cross-asset CTA strategies that are more complex,” he notes. As a result, CTA ETFs therefore act as “a complement to what we already do in-house,” particularly in situations requiring speed, flexibility, or specific implementation. Thulin also highlights that AP3 has been supportive of the ecosystem, including acting as an early backer for certain ETF launches through initial capital commitments.

“Sometimes we need help allocating capital more efficiently into cross-asset CTA strategies that are more complex. [CTA ETFs therefore act as] a complement to what we already do in-house.”

Jonas Thulin, Chief Investment Officer at AP3.

Within AP3’s TPA framework, the rationale for using CTA ETFs or alternative ETFs more broadly centers on liquidity, cost efficiency, and transparency. “If we find an idea that works well in our portfolio and can access it in a liquid format at a lower cost than building it internally, that is attractive,” says Thulin. “We map risks, identify potential market developments, and then screen available instruments to find the best fit for the portfolio.”

This approach allows AP3 to retain full control over portfolio construction. “We dictate the portfolio, we are not subject to an external portfolio manager, nor do we have to pay high fees for expensive active management,” he adds. “From a cost-benefit perspective, this is very compelling.”

Transparency plays a particularly critical role within a TPA framework. Because TPA requires precise, real-time understanding of portfolio exposures, ETFs, with their daily transparency and rule-based construction, are well suited for integration into a total portfolio risk model. “We need full transparency to model outcomes and understand how exposures behave,” explains Thulin. “We do not want a discretionary layer where someone can suddenly do something different.”

“We need full transparency to model outcomes and understand how exposures behave. We do not want a discretionary layer where someone can suddenly do something different.”

Jonas Thulin, Chief Investment Officer at AP3.

For institutional investors operating within a traditional strategic asset allocation framework, maintaining a permanent allocation to hedge funds, or CTAs specifically, can serve as an effective form of protection in risk-off environments. A Total Portfolio Approach (TPA), however, does not require such static exposures. “When you allocate capital across predefined buckets and asset class silos, which I would consider a somewhat old-fashioned approach, it makes sense to use overlays to mitigate tail risk,” says Thulin. “In a TPA framework, that becomes less relevant, as we manage the entire portfolio dynamically as one P&L. This means we can move fluidly across exposures, and a strategy that makes sense today may no longer be relevant six months from now.”

CTA Use at Aars

Morten Christensen, Chief Financial Officer of Aars, has similarly found a role for trend-following CTAs within the family office’s multi-asset portfolio, both through traditional hedge fund structures and ETF formats. Managing capital for the Møller family, best known for founding and controlling Møller Mobility Group, Christensen oversees three liquidity-oriented sub-portfolios, including a multi-asset portfolio with exposure to alternatives.

A long-time observer and investor in the trend-following space, Christensen has followed the evolution of the industry closely, including the emergence of CTA ETFs. “I have been involved with CTAs for around 20 years, on and off, and I remain fascinated by the sophistication of these strategies, the systems, the efficiency, and how they are structured,” he says.

“I have been involved with CTAs for around 20 years, on and off, and I remain fascinated by the sophistication of these strategies, the systems, the efficiency, and how they are structured.”

Morten Christensen, Chief Financial Officer at Aars.

Christensen values trend-following strategies for their convex return profile and their ability to generate “crisis alpha,” particularly during periods of market stress. “Historically, and we have experienced this ourselves, when strong trends develop, such as in 2008 or in 2022 when interest rates moved sharply higher, they are very useful to have,” he explains. “When markets are under pressure, CTAs have typically been able to deliver strong returns.”

As an investor in both traditional and ETF-based CTAs, Christensen finds the ETF format “very interesting,” particularly due to its liquidity and cost advantages. He is also an attentive observer of the ongoing industry debate. “There is a growing argument that traditional CTAs have become increasingly complex, and that the marginal benefit of additional resources may be diminishing,” he notes. This dynamic has led him to closely monitor how ETF-based strategies are challenging traditional implementations.

“There is a growing argument that traditional CTAs have become increasingly complex, and that the marginal benefit of additional resources may be diminishing.”

Morten Christensen, Chief Financial Officer at Aars.

While Aars continues to invest across both traditional fund structures and liquid vehicles, Christensen places increasing emphasis on liquidity, particularly in a more volatile macro environment. In periodic strategic discussions with the family, the conclusion has been that volatility, driven by geopolitics, macro uncertainty, and interest rate dynamics, is likely to remain elevated. “Our assumption is that markets will become more volatile,” he says. “That increases the value of liquidity, as it provides the ability to maneuver through different market cycles.” 

“Our assumption is that markets will become more volatile. That increases the value of liquidity, as it provides the ability to maneuver through different market cycles.” 

Morten Christensen, Chief Financial Officer at Aars.

As a result, Aars is gradually increasing both the share of liquid assets and the number of liquid strategies within the portfolio, with CTAs forming a key component of that structure. Christensen also welcomes the broader innovation taking place in the ETF ecosystem across asset classes. “In a way, using ETFs allows you to become a hybrid between an asset allocator and a portfolio manager,” he notes. He expects continued growth, particularly on the active ETF side. “I see it growing rapidly, as traditional mutual fund managers are entering the space. They recognize that the train has already left the station, and they cannot afford to be left behind,” he argues.

At the same time, Christensen cautions against structural mismatches within alternatives. Investors, he notes, should be wary of strategies that attempt to “create liquidity from inherently illiquid assets,” which he views as problematic. By contrast, he sees the broader evolution of the ETF ecosystem as a clearly positive development.