CTAs had a rough year, and that is sugar coating the reality. There are very few trend followers in this category who were able to generate net gains over the course of this year. The largest of managed futures traders, or quant funds, have wiped out any gains they netted in the past few months as markets were thrown into a ‘taper tantrum’.
Caxton Associates’ Caxton Hawk Diversified was down 2.15 percent in the last month, pulling the YTD gain down to -8.7 percent, according to a investor update seen by ValueWalk. The fund attributes the bulk of its losses to the rumblings of possible war in Syria, which caused the markets to slip into turmoil.
Caxton thinks tactical trades can work
Caxton Hawk has long positions in European currencies versus USD, and short in EM currencies against the USD. Caxton Hawk increased its holdings in developed market fixed income assets, and added shorts in emerging market fixed income. The fund is now long industrials and grains.
Caxton’s Jeff Enslin thinks that the current trading environment is supportive of tactical trades rather than long-term trend-following strategies. Until the Fed gives out a decision one way or the other, this kind of trading environment is likely to prevail. Caxton is executing short term trades and paring and closing positions as global markets show moving trends. Enslin expects the Fed to soften its target of 6.5 percent unemployment to implement tapering.
Winton, Man Group, BlueCrest’s CTAs lose in August
Other CTAs have had similar bad luck. Winton Futures Fund was down -0.1 percent at the end of August after incurring a loss of -3.85 percent in that month, according to returns from HSBC Hedge Weekly. The fund manages $9.5 billion. Returns of BlueCrest Capital’s BlueTrend Fund, which manages $9.8 billion as of June 2013, have plunged to -11.6 percent a year to date. Cantab Capital’s fund named Aristarchus, which manages $4 billion, is probably the biggest loser with a -28 percent loss this year. The fund has suffered through major falls for four straight months now and was down 6.8 percent in the last month.
Graham Capital Management’s Graham K4D-15 Systematic Global Macro Program was down 2.16 percent in August and is up only 0.74 percent for the year. The fund manages $2.5 billion under Kenneth Tropin. Renaissance Institutional Diversified Alpha lost 2.09 percent in August and has incurred an YTD loss of 1.08 percent.
MAN GROUP PLC (LON:EMG) (OTCMKTS:MNGPF)’s AHL Diversified lost 3 percent in August; the managed futures strategy is now down 7.15 percent, whereas AHL Evolution has lost 2.2 percent and is up 4.3 percent for the year.
From the looks of it, September is not going to be any better for trend followers. However J.P. Morgan Cazenove’s report on quant strategies is projecting happy times for the strategy. The report concludes, “2013 seems so far a pretty successful year for Quant strategies.” Their bottom-up quant model is up 6 percent YTD. The report finds that drops in correlation with equities has done magic for quant models and they are doing really well. J.P. Morgan’s index may be doing well, but the same cannot be said for the independent managers in the trend following space.