- Trend-following funds rose 21% during the first half of the year, according to Societe Generale.
- Also known as CTAs, automated strategies go long markets going up and short markets going down.
- The insider highlighted 8 CTA managers who have had strong performances so far this year.
Trend-following hedge funds rallied in the first half of the year as commodities rose and inflation was at an all-time high.
Other categories of hedge funds such as technology hedge or growth funds have not been the top performers as in previous years. As investors have pulled out of those funds, CTAs have brought in more than $4.9 billion in net inflows over the 12-month period ending in June, according to an August Barclay’s Fund Flow Indicator report. CTAs, or commodity trading advisors, typically use computer-based models to trade futures contracts based on other market models. They go long rising markets and short falling markets, but differ in the asset classes or timeframes they can invest in or how much leverage they use.
CTAs rose more than 21% for the year ending Aug. 23, according to Societe Generale’s prime brokerage unit. This is the highest level since the French bank launched its flagship CTA index in 2000. It is outperforming most hedge fund strategies – the industry average has lost 2.7% through the end of July, according to Hedge Fund Research. The S&P 500 was also down over 13% year-to-date as of August 25.
Nigol Koulajian, the founder of $2.5 billion Quest Partners, a New York systematic CTA, told Reuters in May that he looks to make moves during tail events, or rare events that create volatile swings in the market.
“You can actually look for places where market volatility is cheap compared to the historical rate,” Koulajian told the media. He added that in a low-volatility environment, these assets give investors “the most bang for their buck when there’s a recent event.”
8 CTA Managers That Have Outperformed the Market
Eight CTA managers, including Quest, have had strong performances so far this year, according to data from Societe Generale and Institutional Advisory Services Group, which has a CTA database.
- Quest Partners was founded by Koulajian in March 2001 and manages assets for investors such as pension plans, family offices and extremely high net worth individuals. The hedge fund was up 24.5% in the year to Aug. 19, according to a source familiar with the fund’s performance.
- Mulvaney Capital Markets Global Markets Fund was up 70% year-to-date in July and down 14% for the month of July. Paul Mulvaney set up his eponymous shop in 1999 after managing some of Merrill Lynch’s options portfolios.
- Roy Niederhoffer’s flagship fund was down 2.3% for the month of July, but still generated a 44.4% year-to-date return, according to IASG data. Niederhoffer, an accomplished pianist and hedge fund manager, saw his hedge fund flourish during the financial crisis, the Financial Times reported in 2019.
- The Virginia-based Global Quantitative Investment Management Fund was up just over 1% for the month of July, but still generated a year-to-date return of 23.2%, IASG data showed. QIM was founded in 2003 by Jaffray Woodriff, Michael Geismar and Greyson Williams. In 2021, Woodriff was named one of the highest-earning hedge fund managers, Forbes reported.
- Dunn Capital Management’s $753 million Global Monetary and Agricultural Program was up 37.8% year-to-date at the end of July, its latest monthly performance report revealed. It’s up 10% for the month since Aug. 23, according to the firm. The $1 billion Florida-based fund was founded by William Dunn in 1974 and has been led by Martin Bergin since 2007.
- Rosetta Analytics’ DL One fund generated a 5.1% return at the end of July and a 31.2% year-to-date return to the end of July, according to IASG data. His DL Two fund was up 7.8% for the month of July and 8.6% year-to-date. The firm was founded in 2016 by Julia Bonafede, formerly president of Wilshire Consulting, and Institutional Investor columnist Angelo Calvello.
- Netherlands-based Syscat Capital’s Alpha Strategy fund was up 7.7% for the month of July and 39.1% year-to-date, according to a company performance report. The firm was founded by Mahbod Elmi and Arjaan Ringeling in 2016.
- Sweden-based Lynx Asset Management’s original strategy, which launched in 2000, saw a 1.2% increase in month-to-date performance as of Aug. 23 and is up 31.6% year-to-date, according to the site of the company’s website. The firm it manages has over $8.5 billion in assets.