As a new report from Citi Prime Finance reveals that record allocations are held in CTA/macro strategies, Dr Alexei Chekhlov, Head of Research and Portfolio Management at Systematic Alpha Management (SAM), a New York based CTA, has said that "short-term systematic funds will find their footing in the current environment." 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. Still, many short-term CTAs experienced a challenging time last year, as the global markets were transitioning to a new environment, characterized by the European debt crisis, high overall debt and near-zero interest rates in the developed world. However, as markets settled into this new, more volatile regime and the basic properties of the statistical sample became reasonably stationary, short-term CTAs like Systematic Alpha Management have once again been able to find an abundance of opportunities. "It is generally known that periods of rapid regime change present a challenging environment for systematic trading strategies, which rely on inferences from immediate past statistics to generate their trading signals," Chekhlov added. "This is particularly true for short-term managers, as short-term price changes could be more influenced by the properties of a statistical sub-sample. Last year was such an environment and it presented a major challenge to many of these strategies". "Once a regime transition has taken place, leading to some sort of new equilibrium, systematic strategies tend to start humming again."
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This article was published in Opalesque Futures Intelligence.
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