Tue, Mar 19, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Are CTAs a crowded trade?

Tuesday, September 05, 2017

amb
Dr. Tillmann Sachs
Authored by Dr. Tillmann Sachs, CIO and Head of Research at London-based J8 Capital Management.

Recently, an investor asked if investing in CTAs was investing in a crowded trade. We think not!

A) According to the Bank of International Settlement (BIS), the total notional outstanding in derivatives in 2016 was $444 trillion. CTAs manage approximately $350 billion assets under management (BarclayHedge). Assuming an average leverage of 200% across the CTA and Managed Futures industry (CTA survey), CTAs manage approximately $700 billion in notional outstanding. CTAs only make 0.16% of the total notional outstanding in derivatives.

B) Looking at segments and the most crowded: The typical CTA allocation holds 35% in bonds/interest rates, 30% in commodities, 20% in currencies, and 15% in equity linked derivatives (CTA survey). Using BIS data, commodities are the smallest derivatives segment with total notional outstanding of $1.35 trillion. CFTC data suggests about 15% of commodity futures are held by speculators, i.e. approximately 8% of notional outstanding in commodity futures is held by CTAs.

Conclusion: In respect of the total derivatives markets and the US Treasury's definition of a crowded trade, we conclude that CTAs have such small and dissimilar positions that they offer little risk in terms of insufficient liquidity......................

To view our full article Click here

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1