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CTA launches fall to lowest level since 2006

Wednesday, November 25, 2015
Opalesque Industry Update - Having recorded returns of +10.85% in 2014, their strongest performance since returning +15.70% in 2010, CTAs saw further good performance in Q1 2015 as they posted returns of +4.29%. However, negative returns in Q2 (-3.74%) and Q3 (-0.16%) saw volatile swings in CTA performance, and as of the end of October Preqin’s CTA benchmark has recorded YTD losses of -0.39%. In contrast, all other hedge funds have posted YTD returns of +2.45% as of the end of October, despite posting -3.94% in Q3.

Funds of CTAs have posted even more pronounced swings in performance, returning -5.78% in June 2015, and +3.39% the following month. The Preqin benchmark for funds of CTAs is currently -6.18% as of 31st October, having posted losses of 10.88% in Q2.

More Key Hedge Fund Information and Stats:

  •  CTA Launches: Fifty CTAs launched in the first nine months of 2015, and the year looks set for the fewest launches since 2006, when 66 CTA funds launched. As a proportion of all hedge funds launched each year, the fraction represented by CTAs has fallen below 10% for the first time since 2006, and now stands at 9%.

  •  Investor Dissatisfaction: As of the start of 2015, only 14% of investors in CTAs planned to increase their exposure to these funds, despite good performance in 2014. Following poor Q2 performance, a June survey of CTA investors found that over 70% were dissatisfied with returns.

  •  CTA Strategy: Sixty-four percent of CTAs use a trend-following strategy, the largest proportion. Two-thirds of CTAs trade currency futures, while 60% trade stock indexes.

  •  Liquid CTAs: CTAs remain far more liquid than other hedge funds, with an average 11 day redemption notice period compared to 42 days for other products. CTAs also have a redemption frequency of 15 days, allowing investors to make commitments and withdrawals much more quickly than for other fund types.

  •  Investor Geography: Europe-based investors show the greatest appetite for investment in CTAs, with 27% of investors in the region stating a preference for the strategy. Twenty-three percent of Asia-Pacific investors and 19% of American institutional investors are interested in the fund type.

What do you think?

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