Citi Sees Post-Crisis Spike In Interest In CTAs

Jun 5 2012 | 11:37am ET

Investor interest in Commodity Trading Advisors and currency-focused macro hedge funds has increased sharply since the 2008 financial crisis, according to new research from Citi Prime Finance.

A recent Citi report found that CTAs and currency-focused macro hedge funds accounted for 14% of combined industry AUM as of the end of 2011, compared to 10% in 2007.

The report, released at the Managed Funds Association’s annual meeting in Chicago and titled: Moving into the Mainstream: Liquid CTA/Macro Strategies and Their Role in Providing Portfolio Diversification, says such strategies have gone from top of the “risk pyramid” for retail and high net worth investors to core portfolio component.

The report attributes the increased interest in liquid CTA/macro strategies to their positive, uncorrelated performance during the 2008 financial crisis but says the industry has also changed to accommodate increased allocations, seeking ways to extend its capacity and reduce portfolio volatility.

“A significant shift in investment approach has taken place since the 2008 global financial crisis and investors, particularly institutional investors, have been actively looking to diversify their portfolios to better weather periods of unusual market stress,” said Jerome Kemp,  global head of futures and OTC clearing.

The survey also finds a decisive shift within this industry from discretionary to systemic trading. Whereas AUM was fairly evenly split between these two approaches in 2000 (55% systematic and 45% discretionary), Barclay Hedge put that ratio in 2011 at 83% systematic and 17% discretionary.

Sandy Kaul, U.S. head of business advisory for Citi Prime Finance, says the trends are also changing the nature of the systems deployed by participants, allowing for “increasingly dynamic and innovative” trading models. The report shows a significant expansion in the number of models being used to evaluate opportunities, a significant shortening of the time frame under consideration, and broad growth in the number of markets being tracked.

The research was the result of interviews with audiences of CTAs and hedge fund managers focused on highly liquid macro strategies, as well as investors and other participants involved with allocating to these strategies.  In total, the participants represented AUM of $86.5 billion, just over 25% of the industry’s total allocations. 


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of