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Alternative Market Briefing

Can short-term CTAs survive investor's preference toward long-term strategies?

Friday, November 09, 2012

Bailey McCann, Opalesque New York:

Short-term CTA strategies are somewhat new, having only really caught on within the last five years, but can they survive the market? Many of the institutional asset flows favor bigger, slower, longer-term CTAs, putting a pinch on these emergent funds. Participants in our recent Opalesque Managed Futures Roundtable note that there are more differences between short and long term CTAs, however, than just time horizon.

2009 was a banner year for short-term CTAs, spurred by improvements in electronic trading technology and positive market conditions. The returns from short-term CTAs drew significant investor inflows through the first quarter of 2009, according to roundtable participants. But after 2009, the market changed, making it much more difficult for short-term CTAs and raising questions about the staying power of the approach.

"The short answer is that they did not perform very well for three years, and the assets followed suit, exiting those strategies," explains Grant Jaffarian, of Efficient Capital Management. While assets are still coming into short-term CTAs, they are arriving at a decreased rate and the spread between short and long term CTAs has widened. As a result, it can be more difficult for smaller short-term CTAs to last and attract assets. As Opalesque ......................

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