CTAs, or commodity trading advisers, and other computer-powered hedge funds posted mixed results during the stock market’s huge sell-off in August.
However, this does not necessarily mean funds designed to zig when the stock market zags failed to deliver. These so-called trend followers, which posted big gains in the 2008 market meltdown, really need to be judged over a longer period since many of their models are not designed to abruptly reverse when a trend quickly changes direction.
Still, it is instructive to see how they fared in their first big monthly test in a long while.
The Barclay CTA Index, for example, lost just 0.85 percent in August and is now down 0.33 percent for the year. These results are based on the reporting of roughly 60 percent of the funds in its universe.
The Barclay Systematic Traders Index lost about 1 percent last month and is now down 1.45 percent for the first eight months of the year.
The HFRX Macro: Systematic Diversified/CTA Index fell by 1.9 percent, but Chicago-based scorekeeper Hedge Fund Research stressed the composite return was punctuated by a “wide range of underlying constituent performance,” according to a press announcement.
Looking at a slightly longer period of volatility, Bank of America Merrill Lynch notes that CTAs were up 2.83 percent for the quarter through September 2, and up 0.47 percent for the year to date. Its diversified hedge fund index is down 1.71 percent for the year to date.
In any case, in August, CTAs in general made money from their short positions on commodities and long positions on Treasury bills, according to Philippe Ferreira, a senior strategist at Paris-based Lyxor Asset Management, which manages about $21 billion in alternative assets.
However, CTAs were hurt by their generally neutral to slightly positive stance on equities. They also lost money in their currency bucket from being long the U.S. dollar versus the rebounding euro and Japanese yen, since the dollar has depreciated versus major currencies.
However, as HFR points out in a press release, August results were punctuated by a “wide range of underlying constituent performance.”
For example, Quantitative Investment Management’s Global Program QEP, which rarely performs in line with most of its peers, gained 3.17 percent last month and is now up 12.56 percent for the year. The short-term trading-oriented fund, which lost 12.3 percent last year, has made money in five of the eight months this year so far. “Due to its short-term focus, QIM provides a distinct return profile that exhibits a low level of correlation to both traditional market indices and longer-term managed futures strategies,” according to the description of its strategy on ManagedFutures.com.
Leda Braga’s London-based BlueTrend fund was up 0.37 percent and 3.44 percent for the year. During July the fund mostly boosted its risk exposure to bonds, followed by “more modest increases” in foreign exchange, energies and short-term interest rates,” according to its July monthly letter sent to clients.
Paris-based Capital Fund Management’s Discus Feeder program rose 4.14 percent last month through August 28 — with one trading day remaining in the month — putting it back in the black by 1.6 percent for the year.
Other funds did not make money, although in many cases the losses were very modest.
For example, Baltimore-based Campbell Global Assets Fund–Class A (Managed Futures Portfolio) was down a mere 0.25 percent in August. Even so, it is now off 4.15 percent for the first eight months.
Man AHL Diversified lost about 0.4 percent last month and is now down nearly 1 percent for the year.
David Harding’s London-based Winton Futures Fund fell 4.3 percent in August and is off 2.04 percent for the year through the end of August.
Stanley Fink’s ISAM, the International Standard Asset Management Systematic Program, lost 1.11 percent last month after surging 7 percent in July. It is now up 6.61 percent for the year, according to ManagedFutures.com.
The CCP Quantitative Fund-Aristarchus program, managed by Cambridge, UK–based Cantab Capital Partners, was perhaps the worst performer in the group last month. The normally volatile fund fell more than 10 percent in August and is now down 10.45 percent for the year.
The fund was up 39 percent last year after tumbling nearly 28 percent in 2013.
Cantab was founded in 2006 by Ewan Kirk and Erich Schlaikjer. Kirk, who was named an Institutional Investor Rising Hedge Fund Star in 2009, ran Goldman Sachs’ quantitative strategies group in Europe and was responsible for all of the firm’s quantitative technology.
So, how are CTAs positioned now? Entering September, CTAs are short equities, according to Lyxor’s Ferreira.
They also significantly reduced their short positions on the euro and the Japanese yen versus the dollar.
