CTAs Bemoan Fed Uncertainty

Sep 30 2013 | 12:53pm ET

While many hedge funds toast the Federal Reserve's refusal to begin cutting back on its bond-buying stimulus program, long-term commodity trading advisors are cursing the central bank.

Such funds are facing a third-straight losing year, Reuters reports, and the Fed's indecision is in large part to blame: Market volatility, fueled by uncertainty as to the start of the expected taper, has battered long-term CTAs this year, and it is unclear now whether the Fed will actually begin to slow its $85-billion-per-month in bond purchases this year.

The volatility has proven difficult for CTAs' quantitative systems to predict.

"The essence of succeeding as a CTA is having the opportunity to enter and stay in a market," Quantum Leap Capital's Juan Carlos Herrara told Reuters. "You really need continuous movements and in one direction. If only three of four of the markets you're in are doing that, then it's going to downsize your returns."

Herrera would know: Sugar Land, Texas-based Quantum Leap is down 14% this year.

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Editor's Note

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    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…