Software-Based “Robot” CTAs Bounce Back In July


Computers can already play most games, including chess and poker, better than humans. Moreover, it’s starting to look like computers can make some types of investments better than humans can.

According to recent data from Hedge Fund Research, commodity trading advisors, who apply software-based algorithms to profit from trends in financial markets, made big profits last year and also had a great first quarter due to the continued drop in crude oil prices and a rally in stocks and bonds.

CTAs moved up a scintillating 3.5% in July, putting them in the black by 0.4% so for the year, based on data from HFR, as first reported by the WSJ.

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More on CTAs coming back in second half of 2015

Although the CTA sector continued its historic run from 2014 into the first few months of this year, the second quarter saw profits at big-name CTA managers disappear, as financial markets were pummeled over the Greek debt crisis and uncertainty over the path of U.S. and global interest rates.

Early data for the month of July is telling a different story, with the move up taking CTA sector back into positive territory for 2015.

The monthly increase by CTAs was better than that of macro funds (which use human judgment to make trades). The macro fund sector saw a 2.3% gain in July, but are still ahead of CTAs overall so far for the year with a return of 0.9%.

Most CTAs profited from their from bets on gold, oil and the euro, HFR President Ken Heinz noted in a statement to the media, all of which moved down in July. A number of funds switched out of the bullish positions they had held in June to profitable bearish positions in July.

CTAs with the most impressive recent performance include AHL Diversified, up 4.2% this month through July 29th, putting the fund at -2.5% return year to date. Cantab Capital Partners LLP’s CCP Quantitative Fund has surged an impressive 5.8% this month through July 24th, according to a knowledgeable source who spoke to the Wall Street Journal.