Will CTAs continue to rise or is a crash around the corner? #CTAEU
With investors flocking to allocate to CTA funds and particular interest coming from large institutional investors looking for uncorrelated returns, predicting the performance of CTA investments in the future and how they will perform in difficult environments, is a critical question for investors of all shapes and sizes.
As Tim Wong, CEO of AHL pointed out in his keynote address at today’s CTA World Congress Europe, run by Terrapinn, trend following CTAs could be considered quite a depressing space; you spend most of your time losing money, then comes the big trend that will make money. AUM growth in managed futures over the last 10 years has been exponential, yet asset growth is potentially hurting trend following performance because the market becomes overcrowded.
A key question that is on the minds of every investor looking to allocate to CTAs is what will affect the future of CTAs?
Performance is key and the proof will be in the pudding after 2011. Regulation and how it will impact swap structures and changes in transparency requirements is important. Size is critical as well as liquidity and effects on volatility and performance potential. How traditional markets perform and if there is an equity bull run.
The Economist has featured several different front covers that capture which economic cycle we are in. So where are we right now with regards to investing in CTAs?
- Greed: Lovely While it Lasts
- Fear: When Economies Scream, And They All Cried Help
- Herd Behaviour: Buy buy, Sell Sell
It’s clear right now that we are really in the “Lovely While it Lasts” phase. What remains to be seen is how will CTAs perform in the next economic cycle?
Let us know your thoughts below…
Other articles to come out of the CTA World Congress Europe conference include:
> What is the common thread that bonds the CTA industry together?
> Why do CTAs, often called the black box of the investment industry, attract investors?
> 6 things investors consider when considering CTAs as part of their investment portfolio?
> The key reasons investors adopt a systematic approach