Evening Brief – 05.07.24
CTAs and trend-following hedge funds have maintained their strong first-quarter performance in recent weeks, extending positive gains for investors into April and putting them firmly in double-digit territory year-to-date.
As of the end of April, Societe Generale’s main SG CTA Index, which analyzes the daily returns of the 20 flagship CTA strategies run by prominent hedge fund firms, was up 2.25% as of the end of April. The benchmark, which includes funds managed by AQR, Winton, PIMCO, John Street, and Aspect Capital, among others, is now up more than 12% over the past four months.
Meanwhile, trend-followers, as assessed by SocGen’s SG Trend Index, have gained about 15% since the beginning of 2024.
The index measures the daily profits and losses of the 10 largest trend-following hedge fund strategies, which include funds managed by Graham Capital, Lynx, Systematica, and Man AHL. It increased 2.01% in April, putting the index up 14.48% year-to-date.
The SG Short-Term Traders Index, which measures the performance of CTAs and global macro managers with 10-day trading windows, was likewise on course to end April on a positive note, up 2.34% as of April 26. Overall, the index is up 3.67% in the four months since the beginning of January.
CTAs and trend-following strategies use a wide range of systematic investment strategies, algorithms, quantitative signals, proprietary trading models, and other machine-learning techniques to predict price movements and market momentum in a variety of asset classes such as stocks, bonds, currencies, and commodities.
The industry took advantage of the strong equity advance earlier this year and profited from the increase in US Treasury yields in February. More recently, CTAs have effectively traded rising commodity prices, particularly coffee and cocoa.
Despite the recent stock market volatility, Goldman Sachs analysis suggests CTAs will be net buyers of global stocks in early May, with models indicating the sector is long $106 billion in global equities after disposing $55 billion in March.
According to a recent report by PivotalPath, a research and intelligence service that tracks more than 2,500 institutionally relevant hedge funds, managed futures provided the highest alpha for allocators over the S&P 500 on a rolling 12-month basis, at 14.3%.