Tue, Oct 25, 2016
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Citi survey shows investors’ interest in CTA and Macro Strategies accelerated following 2008 financial crisis

Tuesday, June 05, 2012
Opalesque Industry Update - Investors’ attention to Commodity Trading Advisors (CTAs) and to currency focused Macro hedge funds accelerated in recent years, particularly after the 2008 Financial Crisis, increasing market share to 14% of combined industry AUM at the end of 2011, up from 10% in 2007 according to a survey released today by Citi (NYSE: C) Prime Finance at the Managed Funds Association’s Annual Conference, Forum 2012 in Chicago. The report, “Moving into the Mainstream: Liquid CTA/Macro Strategies and Their Role in Providing Portfolio Diversification,” outlines key factors that make liquid CTA/Macro managers attractive to investors relative to long-only and hedge fund strategies and provide a ready source of liquidity in times of market stress.

From their original position atop the retail and high net worth investor’s “risk pyramid,” the Liquid CTA/Macro industry has broadened out and become a core portfolio component for institutional investors in recent years – from public and corporate pensions to endowments and foundations to family offices.

The research indicates that positive, uncorrelated performance during the 2008 Global Financial Crisis helped accelerate this expansion in the industry’s investor base. Yet, the industry itself also changed to accommodate this new institutional target market. To absorb the extensive asset flows originating from institutions, the industry sought means to extend its capacity and reduce portfolio volatility.

“A significant shift in investment approach has taken place since the 2008 Global Financial Crisis and investors, particularly institutional investors, have been actively looking to diversify their portfolios to better weather periods of unusual market stress,” said Jerome Kemp, Global Head of Futures and OTC Clearing.

As the investor audience base has grown, the distribution model too has evolved. Whereas money was primarily raised for these managers by wire house financial advisors via managed futures product in the early years of the industry, managers now list their funds on institutionally focused capital raising platforms and further develop their own hedge fund-like marketing teams to directly raise assets.

The survey also finds that there has been a decisive shift within the Liquid CTA/Macro manager landscape toward systematic as opposed to discretionary trading. Whereas AUM was fairly evenly split between these two approaches in 2000 (55% systematic and 45% discretionary), according to Barclay Hedge that ratio changed dramatically to 83% systematic and 17% discretionary by the end of 2011.

“These trends are not only driving the industry to be more systematic, but they are also changing the nature of the systems being deployed by participants and allowing for increasingly dynamic and innovative trading models,” continued Sandy Kaul, US Head of Business Advisory for Citi Prime Finance.

According to the research, there has been a significant expansion in the number of models being used to evaluate opportunities, a dramatic shortening of the time frame under consideration, and broad growth in the number of markets being tracked resulting in distinct “generations” of systematic approaches:

  • Generation One – primarily a long-term trend-following system focused on the traditional commodity markets
  • Generation Two – a set of models with broader measures such as mean reversion, momentum, volatility, and others focused on a more expansive set of financial and currency contracts
  • Generation Three – further set of expanded models that layer multiple sets of models on top of the same market and allow prices and positions to be translated across markets and into alternative measures
This paper is the result of a series of qualitative interviews conducted with an audience of CTAs and hedge fund managers focused on highly liquid macro strategies, as well as investors and other participants involved with allocating to these strategies. In total, the participants represented AUM of $86.5 billion USD, just over 25% of the industry’s total allocations. The full survey can be read here

Press Release


What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. M&A - U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga, Hedge fund Parvus shows hand, toppling William Hill merger deal[more]

    U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga From Thisismoney.co.uk: The fierce battle to buy Britain's biggest private equity group has come to an unexpected conclusion, with the original bidder walking away with the prize. SVG Capital has agreed

  2. Marc Lasry: Energy is still a phenomenal opportunity[more]

    From CNBC.com: Distressed debt specialist Marc Lasry said energy debt is still a "phenomenal opportunity" because investors can get "massively overpaid" for the risk they take on. There are "huge opportunities" in the energy sector especially in restructurings, the Avenue Capital Group CEO said Tues

  3. Opalesque Exclusive: Ex-SAC manager re-emerges with market neutral hedge fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A manager re-emerged from the SAC battleground last year to launch his own hedge fund under the umbrella of New York-based investment firm Endicott Group.

  4. North America - Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation, Billionaire hedge fund titans Dinan, Lasry on election, markets and best investment ideas[more]

    Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation From Marketwatch.com: Kyle Bass, founder of Hayman Capital Management, on Wednesday warned that the U.S. is headed toward so-called stagflation. Stagflation is typically described as persistently high inflation and hi

  5. David Einhorn speaks on passive investing, Mylan, his cheapest stock, the Fed[more]

    From Forbes.com: Greenlight Capital hedge fund manager David Einhorn (Trades, Portfolio) joined nine other famed investors on Tuesday to talk about stocks at the annual Great Investors’ Best Ideas Investment Symposium in Dallas. Presenters at the annual conference typically pitch one or severa