CTAs Stand Out Amongst YTD Returns And Flows

By Hedge Fund Insight staff

Hedge fund asset flow data for November was unremarkable with one exception – the flows out of CTAs.  There have been outflows from CTAs in aggregate in each of the last 6 months. The performance of CTAs in 2013 has been exceptional, but not in a good way, as the graphic below shows.

2013 year-to-date returns across strategies

source: Eurekahedge


Managed futures are the only major investment strategy making losses on the year-to-date. Whilst losses are tiny,  down 0.99% YTD on the Eurekahedge CTA/Managed Futures Hedge Fund Index, the losses are part of a longer term trend. So, after losing money in four out of the last  five years (at the index level) the marginal shift in allocations to the strategy has become negative. Eurekahedge data shows net ouflows of $3bn from CTAs in November.

2013 year-to-date hedge fund asset flows by strategy employed
source: Eurekahedge
Not all CTAs are reporting losses for the year, and those with a bias towards agricultural futures may well be in the black, as are some with a healthy allocation to trading equities.  Winton is in this latter camp – the Winton Futures Fund is up 9.01% so far in 2013, largely because of allocations to the Winton Global Equity Fund, which is up 27.07% this year.
The lack of opportunities for staff at CTAs to be paid a meaningful bonus again, after a bonus drought of three/four years is beginning to have an impact on quant staff retention. There has already been something of a diaspora from some major trend-following managers, and top multi-strategy hedge fund firms are able to pick up experienced, capable quant investors to add to their existing teams.  The number of quant-driven start up hedge fund managers is also expected to hold up, if not increase in 2014.