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By Opalesque Geneva: A multi-strategy non-trend CTA delivered a strong performance in April, thanks to its mean reversion strategy and VIX behavioural models.
Diversified Alpha, launched in February 2016, uses a multi-strategy, non-trend systematic approach to trade liquid futures markets. It aims to deliver uncorrelated, absolute returns through all market environment, applying scientific methods to identify a range of alpha, diversified by asset classes and time-frames.
The fund uses over 30 independent strategies, which are designed to complement one another and to differentiate from traditional CTAs. Risk management includes reactive and proactive measures operating within and across strategies.
It is managed by DCM Systematic SA, a $545m independent, quantitative investment manager based in Geneva, Switzerland and established in 2014. Senior members of the investment team previously worked together at BlueCrest, a British-American investment management firm focused on fixed income macro trading. They have been developing and managing systematic strategies since 2007.
According to Dr Jerome Callut, head of research and one of the three co-founders of the firm, Diversified Alpha benefited from April's heightened market volatility. In particular, the VIX strategies were instrumental in capturing gains during this period of dislocation.
Callut will present at the Small Managers - Big Alpha Episode 17 interactive webinar on June 10th (details below).
"Our mean reversion strategy has performed strongly in recent periods, with the shock impulse model in particular capitalizing on heightened market volatility and significant price movements to generate returns from reversion opportunities," he tells Opalesque.
"Our behavioural models also delivered robust results this year, especially those focused on the VIX. Notably, we saw strong performance following the so-called 'Liberation Day' when our VIX behavioural model was well-positioned - establishing long positions at the front end of the curve ahead of the tariff announcement and benefiting from the ensuing spike in volatility."
Positive developments into commodities and mean reversion
Over the past year, DCM has broadened their asset universe with a particular focus on expanding into the commodity space, Callut adds. "Extending our existing models to include more niche commodities has provided meaningful diversification benefits and has already contributed positively to portfolio returns."
In April, the term-structure-based models on oil underperformed but there were positive contributions from the exposures to metals, grains, and soft commodities, which helped offset some of the losses in the energy sector.
Another recent change was the introduction of a new mean reversion strategy (a trading approach that capitalizes on the tendency of financial assets to revert to their historical mean or average price over time) - DCM's so-called shock impulse model - which is designed to capitalize on reversals following large market moves. This strategy has delivered strong contributions to performance this year.
The Barclay CTA Index was down 2.2% in April 2025 and down 2.7% YTD. Meanwhile, the HFRX Macro/CTA Index lost 3% that month, and is down 3.8% YTD.
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