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Alternative Market Briefing

CTAs outperform hedge fund strategies in April

Tuesday, May 07, 2019

Laxman Pai, Opalesque Asia:

The month of April saw CTAs outperforming hedge fund strategies for the second month in a row.

According to the Lyxor CTA peer group, the strategy was up 1.6% last month, bringing year-to-date performance close to 5%.

CTAs benefitted in April from the robust performance of equity markets, as well as the rebound of the US Dollar index and energy prices.

The short positions of CTAs on agricultural commodities were also rewarding. The positioning of CTAs has shifted recently in favor of equities versus bonds while still maintaining long positions on both asset classes. Long exposures to both energy contracts and the US Dollar were also reinforced.

Systematic strategies are back

Meanwhile, systematic Global Macro strategies, a subset of LyxorGlobal Macro peer group, also delivered strong returns both in April and year-to-date (2.3% and 3.9%, respectively).

Systematic alternative strategies are thus doing well at present, although it remains tricky to predict how long that will last.

Academic research has explored the momentum risk factor, but systematic strategies are broader (though they tend to have varying degrees of sensitivity to the momentum risk factor).

As Daniel and Moskowitz put it, momentum crashes "occur in panic states, following market declines and when market volatility is high, and are contemporaneous with market rebounds." (Momentum Crashes, Journal of Financial Economics, 2016) At first g......................

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