CTAs, Trend-Followers Falling Behind

CTAs and trend-following hedge funds are on track for a second straight month of losses, as managers relinquish some of the impressive gains notched earlier this year.

The Societe Generale SG CTA Index, a key industry benchmark, fell 2.21% in the final week of June. After posting double-digit returns in the first quarter, managed futures funds soared to more than 12% by mid-April, fueled primarily by being on the right side of long calls on rising equities and cocoa markets, as well as successful shorts on the Japanese yen and natural gas futures.

However, the SG CTA Index experienced its first negative month in May, falling approximately 2% due to losses in energy and agriculture holdings, while cocoa futures have fallen in recent weeks, affecting the commodity’s previous strong momentum. After losing more than 2% in recent weeks, the CTA index’s year-to-date gains were at 7.09% as of June 26.

The index tracks the daily net returns of 20 flagship managed futures strategies run by the largest hedge funds in the industry, including long-term strategies run by AQR Capital Management, PIMCO, Winton Capital Management, Man AHL, and Graham Capital Management.

Meanwhile, trend-following techniques, as tracked by the SG Trend Index, are expected to generate an 8.51% first-half return for investors, despite a 2.84% loss in June. SocGen’s daily tracker of the top 10 trend-following hedge funds, which includes strategies managed by Lynx Asset Management, Systematica Investments, Aspect Capital, and TransTrend, has reversed in recent months, sustaining monthly losses in May and June after rising about 13% in the first quarter.

Meanwhile, the SocGen Short Term Traders Index, which tracks CTAs and quant macro funds with shorter-term strategies based on a 10-day trading window, is down 1.62% month to date. That lowered year-to-date performance to less than 1%, with the benchmark at 0.98% as 2024.