CTAs on course for positive January returns

^{By Hugh Leask}

CTAs and trend-following hedge funds have made a positive start to the year following a bruising 2023, with the strategies on course to end January up more than 1.5%, according to new industry data tracking the biggest managed futures funds.

Societe Generale’s main SG CTA Index - a key industry benchmark which measures the daily returns of a pool CTAs run by the largest managers - added 1.58% in the opening month of 2024.

The flagship index – which includes strategies run by brand-name managers including Systematica Investments, Winton Capital, PIMCO, Aspect Capital, Man AHL and Millburn Ridgefield – recorded its best-ever performance in 2022 since launching in 2000, with CTAs generating blockbuster annual returns of more than 20% on average.

But the sector failed to repeat that stellar showing last year, with the benchmark losing almost 3% over the course of 2023.

CTAs and managed futures funds — which utilize a range of systematic and machine-learning approaches to invest in positive and negative pricing trends in across equities, fixed income, rates, commodities, currencies and more — struggled with see-saw market momentum over the course of last year. The sector was hit hard by March’s banking sell-off, later making a steady recovery on the back of stock market gains before stalling again amid uncertainty over interest rates changes toward the end of the year.

Similarly, the SG Trend Index — an equally-weighted barometer of the largest 10 trend-following CTAs’ performances — rose 1.74 % during January. The index — which includes strategies run by Graham Capital Management, Systematic, Man AHL, and Lynx Asset Management — ended 2023 down some 3.3%.

The SocGen Short-Term Traders Index, a performance measure of CTAs and global macro managers with 10-day trading windows, is set to end the month broadly flat. The benchmark is marginally positive, with a 0.04% January rise, having lost some 1.45% over the course of last year.

SocGen recently announced the 2024 constituents for its range of CTA indices, following an annual review.

Peek under the hood

There are no changes to the constituents in the flagship SG CTA Index. However, AQR Capital (Manager Futures) has been readded to the SG Trend Index for 2024, while one new constituent — dormouse Limited — was added to the SG Short-Term Traders Index.

“It is interesting to note the evolving asset landscape in the CTA industry, and we are delighted to re-add AQR Manager Futures to the SG Trend Index in 2024,” said Tom Wrobel, director of capital consulting at Societe Generale Prime Services and Clearing. “The changes in the various indices constituents reflects recent growth and performance.”

SocGen said that the asset cut-offs for inclusion in SG indices remained the same year, reflecting last year’s broadly flat CTA performance. The asset cut-off for the SG CTA Index constituent programs for 2024 was $1.82 billion, a slight decrease from last year, while the SG Trend Index asset cut-off rose slightly to $4.78 billion in 2024. The SG Short-Term Traders Index cut-off also rose slightly, to $270 million for 2024.

The new constituents have been effective as of Jan. 1, 2024.

_{This article, “CTAs on course for positive January returns” was originally published on February 6th, 2023 on Alternatives Watch and is republished here with permission from BMV Digital, Inc.}