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Managed Futures Down In September But Still Enjoying Solid Year

Back in August I looked at how some of the trend following programs in the SG Trend Index were doing. At the time they were enjoying year to date performance not seen in a long time, but they have given back some of their gains recently so I figured I’d check in again.

The leading product in the SG Trend Index is Swedish manager Lynx Asset Management’s Lynx Program. The SG CTA Index uses Lynx’s Bermuda D offshore vehicle but the folks at NilssonHedge use a composite number, but it’s the same program and is still the leader of the pack in 2019. Aspect Capital’s Diversified Program is second. Despite all ten products retreating in September (ISAM’s systematic trend program in particular had a tough month, down -10.97%), they are all still healthily in the green through the end of September 2019.

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This week I’m also going to look at the flagship SG CTA Index, which consists of twenty managed futures programs. Again, the data comes from NilssonHedge, and we’re using the First Quadrant Tactical Currency Allocation L/S 2% version of the fund (the program listed as an official constituent of the CTA Index by SG is the “First Quadrant LP (Tactical Currency Allocation L/S)”, without the 2%, but they appear to be very close). Lynx and Aspect are also constituents of this index, and they are again leading the way in this index with impressive 20%+ gains this year. Four of the twenty programs are underwater in 2019, but the remaining sixteen that NilssonHedge tracks are all in the green through September.

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These are pretty impressive results overall, and to have another confirmation of industry returns coming back to some “normality” I also take a look at the scatter plot of Maximum Drawdown vs Sharpe Ratio. The distribution of managers appears quite healthy - the majority of programs is clustering in the top right corner (smaller Drawdowns and larger Sharpe Ratios) - exactly where you want them to be. 

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It remains to see how the new QE (that we are not supposed to call QE!) is going to affect the returns of CTA programs going forward - as we have shown in a couple of publications the QE tends to have a detrimental effect on CTAs - but I remain hopeful that history will show that 2019 was a good year for the managed futures industry. We'll be keeping a close eye on these programs through the end of the year.

Dmitri Alexeev is Co-Founder of AlphaBot