Investors Bolt From Downtrodden CTAs

Oct 2 2013 | 10:29am ET

Three straight down years appears to be the limit for some commodity-trading adviser investors.

The $330 billion strategy suffered its first outflow in five years in the first half, with investors pulling $1.33 billion, according to BarclayHedge and Newedge Group. Hedge Fund Research estimates that CTAs were hit with more than $1 billion in the second quarter alone.

The redemptions come as CTAs, which posted huge gains during the financial crisis, are on track to post losses for the third year in a row. The poor performance is taking its toll on some of the biggest names in the industry, including Man's AHL, whose assets have fallen by more than half. Cantab Capital Partners and Winton Capital Management have also suffered redemptions.

The strategy's Sharpe ratio has also plummeted by more than 90%, and its negative correlation to the broader markets has evaporated.

"CTAs are going to have a hell of a job convincing investors they fulfull a viable role," one prime broker told Reuters.

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