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The year 2016 gets off to a great start for CTAs

Year to date, most alternative strategy performance are negative. Despite this challenging environment, CTAs have recorded an excellent start since the beginning of the year. According to Credit Suisse, CTAs posted a gain of 7.38% in late February 2016, the strongest performance of all alternative strategies...

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Year to date, most alternative strategy performance are negative. Despite this challenging environment, CTAs have recorded an excellent start since the beginning of the year. According to Credit Suisse, CTAs posted a gain of 7.38% in late February 2016, the strongest performance of all alternative strategies, a better performance than Dedicated Short Bias funds (+ 6.13%) focused on short positions in equity markets. We must therefore believe that the stock market tumble from the beginning of this year, has benefited widely to CTAs, also called "Managed Futures".

Hedge Fund Performance– Source : Credit Suisse

Beyond this stock market decline, CTA fund managers have mostly been able to record profits through long positions on bond markets and the Yen / Dollar parity. At the same time, they have maintained their short positions on the energy markets, as recalled in a recent note published by Lyxor AM research.

It must be noted that most of these funds use trend following systematic strategies, allowing them to track both the upward and downward market trends in all classes assets (stocks, bonds, currencies, commodities) by trading on the most liquid futures markets.

Thus, in the event of stock market stress, there is little doubt that the Managed Futures should be able to take their game and give appetite among investors. Preqin also expects strong capital inflows in 2016 for this type of alternative strategy.

However, a sharp rebound in stock exchanges or a sudden rise in interest rates, would affect CTA performance in the short-term. Obviously, if these trends expand, it is likely that these funds would quickly take position in the correct "way" in order to take advantage of this trend reversal.

RF , Steve Tui , April 20

Article also available in : English EN | français FR

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