Commodity trading advisers and other computer-driven hedge fund strategies had a rough September, capping a losing third quarter. As a result, the average CTA is now down for the year.
What’s more, many of the larger, more high-profile funds have fared worse than the broad CTA indexes. CTAs lost 1.8 percent in September, with the majority of funds losing money on short crude oil positions, according to Credit Suisse Prime Services, the prime brokerage division of investment bank Credit Suisse.
According to Société Générale Prime Services, its flagship SG CTA Index fell 1.20 percent in September and was down 3.09 percent for the quarter. This makes the September three-month period the first losing quarter for the strategy since the second quarter of 2015. For the year, the index is barely positive, up just 0.95 percent. The SG Trend Index lost 1.93 percent last month and 3.63 percent for the quarter. It is down 1.81 percent for the year.
Looking at the individual funds, most of the larger CTAs are negative for the year. For example, London-based Man Group’s AHL Diversified program fell 2.75 percent in September, extending its loss for the year to more than 6 percent. The fund lost money in four of the five previous calendar years.
The Bluetrend Fund, managed by Leda Braga’s St. Helier, Jersey-based Systematica Investments, was down about 7.1 percent for the year after losing 6 percent in September. It had made money the two previous years.
The Roy G. Niederhoffer Diversified Offshore Fund lost 15.50 percent through the first three quarters of the year. It had posted gains between roughly 4 percent and 15 percent in each of the three previous years. The fund is managed by New York-based managed futures firm R.G. Niederhoffer Capital Management, headed by Roy Niederhoffer. He is the much younger brother of the more famous Victor, a commodities trading pioneer and onetime partner of George Soros.
The International Standard Asset Management (ISAM) Systematic Trend fund, managed by Stanley Fink’s London-based ISAM, is down 5 percent for the year. It returned nearly 15 percent last year and nearly 62 percent the previous year.
The Winton Futures Fund, managed by David Harding’s London-based Winton Capital Management, was also down through September, by about 1 percent. However, it was off another 1.6 percent in the first three trading days of October.
Not all CTAs and systematic funds are losing money this year. For example, the CCP Quantitative Fund - Aristarchus program, managed by Cambridge, UK–based Cantab Capital Partners, is up 2.15 percent for the year despite losing about 2.4 percent in September. The firm was founded in 2006 by Ewan Kirk, who ran Goldman Sachs’ quantitative strategies group in Europe and oversaw quantitative technology for the firm, and Erich Schlaikjer.
The fund is volatile, even by CTA standards. Consider that in the four previous years, it was down 8.2 percent, up more than 39 percent, down nearly 28 percent and up 15 percent, respectively.
The Two Sigma Compass Cayman Fund, managed by New York-based Two Sigma, is also in the black. It is up 10 percent for the year through September despite dropping about 2.30 percent in September. The fund has compounded at about 16.5 percent per year since its 2009 inception.
That CTAs are generally having a rough time of late is not too surprising to the folks at Paris-based Lyxor Asset Management, a Société Générale subsidiary. Back in the middle of September, Lyxor cut its investment recommendation on long-term CTAs to neutral from slight overweight and upgraded short-term CTAs to slight overweight from neutral.
Although it did not expect the Federal Reserve to raise interest rates at its September 21 meeting, Lyxor was bracing for a long bond market correction for a variety of reasons, including the expectation that if Donald Trump is elected U.S. president on November 8, he will usher in “expansionary fiscal policies which could exacerbate bond vigilantes’ concerns.” Earlier this week Lyxor reaffirmed this stance.
