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Trend following CTAs benefit from January markets

commodity tradingHedge funds referred to as “trend followers” saw positive returns in January as they rode the upward trend in equity markets.

Trend followers form a part of the wider commodity trading advisor (CTA) category of investment management.

The whole CTA segment saw “a very promising start” to 2018, according to Societe Generale Prime Services (SGPS), which compiles the SG CTA indices.

But the Trend Index led with a 5.85% gain, marking the best month return for the index since November 2014.

The term ‘trend followers’ tends to refer to computer-driven managed futures strategies and returns are affected by the direction that markets take, whether in commodities, currencies or securities.

CTA as a whole had their best start to a year since 2016, with 80% of the CTA index constituents in positive territory at the end of January.

Tom Wrobel, director of alternative investments consulting at SGPS, said:  “With volatility increasing and uncertainty about the direction of global stock markets unfolding at the end of the month, many CTAs gave back some of their earlier gains but still finished strongly positive.”

But he added: “This uncertainly has hit many CTA strategies at the beginning of February, and it will be interesting to see how performance unfolds for trend-followers and non-trend strategies in the coming months.”

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