Computer-driven hedge funds renowned for “trend-following” are beating their highly paid human counterparts so far this year after struggling to make money in four of the past five years.
Now as stock markets and commodity prices continue rebounding this month, the question is whether these funds, often known as commodity trading advisers, or CTAs due to their legal set-up, can still prosper.
Such “systematic” funds, which surf trends using financial models and algorithms, do well whenever there is a clear direction for markets. Down markets are as good as uptrends, so long as they are clear, and in January and most of February, financial uncertainty proved profitable.
Lists of the best-performing funds were dominated by trend followers and quantitative specialists.
As of February 17, CTA funds were up 7 per cent but the gain for the year now looks like a more modest 5.4 per cent, according to Société Générale.
Troy Gayeski, partner at the fund of hedge funds SkyBridge Capital, says investors have been burnt before by chasing returns in CTAs but that “this time it is different”.
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