Sat, Jun 25, 2016
A A A
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

bc

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. Opalesque Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Global markets fell, hedge funds gain in mid-June on Brexit, Fed rate concerns[more]

    Komfie Manalo, Opalesque Asia: Global financial markets declined through mid-June, as uncertainty associated with the upcoming Brexit referendum and expected U.S. Fed interest rate hike contributed to increases in volatility across asset classes, data provider