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Alternative Market Briefing

Other Voices: CTAs: Where do we go from here?

Thursday, November 12, 2009

This commentary was written by Maximilian Thiel, senior manager at AIMhedge Management Ltd, a Liechstenstein and Caymans-based alternative management firm.

The firm's flagship, AIMhedge Global Diversified Fund Ltd, is a systematic hedge fund focused on delivering absolute returns by investing in financial and commodities futures. It returned +41.36% last year and -14.35% YTD (est., to 10-Nov-09), managing $73.6m and having annualised almost 12% over the last 5 years.

Systematic trend following Managed Future Funds (also known as Commodity Trading Advisors or CTAs), pursue the strategy of trend following in financial- and commodity markets. They are able to generate profits on falling and rising markets and were able to generate +1988% of return since 1980 making this approach one of the most profitable capital investments available. This year, however, CTAs have had difficulties generating returns raising the question "Is the current under performance temporary or have the financial markets changed such that trend following is no longer viable?"

Ideal market scenarios for the trend following strategy are characterized by clear trends in numerous markets. This was demonstrated in the financial crisis of 2008, where trend following CTAs posted large profits over a period where most other investments vehicles posted record losses. As with all strategies, however, there are market situations that are not suited to trend following and thi......................

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