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Alternative Market Briefing

Short term CTAs see improving climate ahead

Monday, June 25, 2012

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Peter Kambolin
Bailey McCann, Opalesque, New York:

Short-term CTAs are finding themselves well positioned for returns given current market conditions. A recent report from Citi Prime Finance shows that record allocations are flowing into CTA and macro strategies as investors seek returns that aren't solely tied to volatile equity markets. This is welcome news for short-term CTAs that have had a hard time finding returns in the last few quarters.

CTA assets under management rose 52% between the end of 2007 and 2011, according to Barclayhedge. The turning point for CTAs came in 2008, the Citi report says, when they outperformed other hedge fund strategies and long-only managers. This led many institutional investors to look at ways to diversify their portfolios to weather periods of market volatility.

However, many short-term CTAs had a hard time catching fire during much of last year. Now, as markets have more or less settled into high volatility and have priced in many negative events like the Eurozone crisis, short term CTAs are showing growing returns.

"The choppy environment we’ve been experiencing since August of 2011, with the increase in volatility, as measured by the VIX, has also been positive for our flagship trading strategy, which has generated positive returns in 7 of the last 9 months. Many indications are pointing to the curren......................

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