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Managed Futures Strategies Begin 2021 In The Red

The managed futures subsection of the hedge fund industry began 2021 in the red, according to the Societe Generale Prime Services and Clearing family of CTA indexes. The Flagship SG CTA Index finished down -1.14% and the SG Trend Index -0.75% in January; Performance slid from mid-month gains of approximately +1.7% and +2.5% for CTAs and dedicated trend-followers respectively, as markets became more volatile at the end of the month.

Only a limited few CTAs managed to hold on to profits and finish the month in the black, with only two trend-followers, one non-trend, and one shorter-term CTA delivering positive performance. Shorter-term CTA strategies underperformed, the SG Short Term Trader Index closed January down -1.59%, in what appeared to be a difficult market environment throughout the month.

The SG Trend Indicator attributed the main market drivers as commodities and bonds on the upside, and currencies and equity indices as the losers. Moves in commodity markets provided a diverse set of opportunities from predominantly upwards price trends, versus other potential gains from the continued downward momentum in US government bonds. In contrast the recent US dollar weakness trend reversed, making it hard for trend-following strategies to profit, and volatility in global equity markets erased gains from earlier in the month and depending on exact positioning may have led to losses for many CTAs.

Tom Wrobel, Director of Capital Consulting, at Societe Generale Prime Services and Clearing, said:

“After a strong finish to 2020, with CTAs delivering record performance in December, gains were initially extended into 2021 before a spike in volatility made conditions harder for many CTA strategies, including trend-following. Institutional investor interest in CTAs remains high and they are in focus after 2020. It was reassuring to see that despite realising losses in aggregate during January, there were some CTAs that posted profits and many market trends continued to produce positive opportunities for CTAs. Historically CTAs have described themselves as ‘long-volatility’ so as new potential market regimes are revealed they may be well placed to navigate those markets both up and down.”

 


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