CTAs Surge Amid Market Meltdown

Many of these funds are up between 40 percent and 60 percent, and at least one is up by triple digits.

Michael Nagle/Bloomberg

Michael Nagle/Bloomberg

It’s 2008 all over again for CTAs… or is it the 1970s?

Whichever is the case, the computer-driven trend-following set is distinguishing itself as the performance champ of 2022, in what is threatening to become a ferocious bear market for stocks.

But this is what this group of funds, also known as managed futures, is supposed to do. They’re considered a safe haven during stock market collapses because of their mostly zero or even negative correlation to the major stock indices. Many of these funds are up by as much as 60 percent, and at least one has enjoyed triple-digit gains.

Most of the top performers are firms that have been doing this for more than two decades.

For example, The Mulvaney Global Markets Fund, launched in 1999, is the top performer so far this year, up 135 percent after surging 17.6 percent in September, according to a CTA database.

R. G. Niederhoffer Capital Management’s Diversified Program is up 75 percent after gaining 5.5 percent in September, according to the CTA database. It launched in 1995.

The DUNN World Monetary & Agricultural (WMA) Program, launched in 1984, is up about 67 percent after gaining 7.07 percent in September, according to the firm.

“The most substantial position in the portfolio is still net short fixed income,” the firm told clients in its September letter, obtained by II. “Net short currencies (against the U.S. dollar) and long energies are moderately sized positions. This is followed by small net short positions in both stocks and agriculturals, and even smaller positions in short metals and the VIX.”

The Tulip Trend Fund A class was up 58.4 percent through September, according to a hedge fund database. The fund launched in 2003.

Meanwhile, Aspect Capital Management, which manages about $10.3 billion, posted a 5.16 percent gain in September in the Aspect Diversified Programme, extending its gain for the year to 43.65 percent. The fund, launched in 1998, has told clients that at the beginning of the year, the play was on rising inflation. By mid-April, however, that fear had changed into worries about an impending recession caused by excessive tightening by central banks, and the firm reversed its play on energy and other commodities that had suddenly begun to sag in price.

This year, Aspect has made money across most asset classes, in particular from the European energy sector — electricity, gas, and hydroelectric power. “The entire system is very stressed due to Russia’s war,” said Radvan Remsing, director of investment solutions at Aspect Capital, in a phone interview.

On the short side, Remsing said, the firm enjoyed strong gains from the rate-rising cycle. It started in emerging markets countries, which got ahead of the Fed and G3, and as the year progressed, the intensity of returns shifted to more liquid bond markets — T bills and gilts, for example.

It also made money from the dollar’s surging strength against the euro, pound, and emerging market currencies, among others.

Welton Investment Partners’ Welton Trend gained 4.45 percent in September and is now up 24.85 percent for the year, while Welton Global surged 8.59 percent last month and is now up 37.61 percent for the year, according to firm communications seen by Institutional Investor.

“September delivered central bank policy changes globally, with notable rate hikes in the United States, Canada, the European Union, and England,” Welton told Global Fund clients in its monthly report. “Markets broadly sold off across sectors, and risk sentiment spiked, with the VIX breaching 30 for the first time since June. Most interestingly, Japan and England intervened in their currency and interest-rate markets as fears of contagion increased. These conditions presented a rich opportunity set for Welton Global to capture profits across strategy groups and sectors.”

September performance was mostly driven by foreign exchange investments, followed by fixed income and equities, according to the report.

Elsewhere, the Systematica Bluetrend fund, launched in 2004, was up 37.6 percent through September, while the Campbell Managed Futures fund, launched in 1998, was up 37.2 percent through September.