Trend-following hedge funds climb further in April
By Hugh Leask
CTAs and trend-following hedge funds have maintained their stellar first-quarter momentum in recent weeks, extending positive gains for investors throughout April to put them comfortably in double-digit territory on a year-to-date basis.
Societe Generale’s main SG CTA Index, which tracks the daily returns of the 20 flagship CTA strategies run by major hedge fund firms, generated 2.25% as April drew to a close. The benchmark – which consists of funds managed by AQR, Winton, PIMCO, John Street, and Aspect Capital, among others – is now up more than 12% over the four-month period.
Meanwhile, trend-followers, as measured by SocGen’s SG Trend Index, have gained close to 15% since the start of 2024.
The index is a daily measure of the gains and losses of the 10 biggest trend-following hedge fund strategies, including funds run by Graham Capital, Lynx, Systematica, and Man AHL. It rose 2.01% during April.
That gain puts the index up 14.48% on a year-to-date basis.
Sector deep dive
Elsewhere, the SG Short-Term Traders Index, a performance measure of CTAs and global macro managers with 10-day trading windows, was also on track to finish April positively, having notched 2.34% as of April 26. Overall, the index has gained 3.67% in the four months since the start of January.
CTAs and trend-following strategies use a vast array of systematic investment strategies, algorithms, quant signals, proprietary trading models and other machine-learning techniques to bet on price movements and market momentum in various asset classes, including stocks, bonds, currencies and commodities.
The sector successfully captured the sustained equity rally earlier in the year, and benefitted significantly from February’s treasuries sell-off. More recently, CTAs successfully traded on downward moves in the Japanese yen, as well as soaring commodities prices, particularly coffee and cocoa, as adverse weather squeezed production of both and pushed prices higher in March.
Looking ahead, despite the recent stock market wobble, new Goldman Sachs analysis indicates CTAs will be net buyers of global equities in early May, with models showing the sector positioned long $106 billion on global equities, having offloaded $55 billion in March.
Recent analysis by PivotalPath - an industry research and intelligence provider which tracks more than 2,500 institutionally relevant hedge funds - shows managed futures delivered the strongest alpha for allocators over the S&P 500 on a rolling 12-month basis, at 14.3%.
This article, “Trend-following hedge funds climb further in April ” was originally published on May 7, 2024 on Alternatives Watch and is republished here with permission from BMV Digital, Inc.