The BarclayHedge CTA Index ended July up 7.08% year to date, outperforming the aggregate hedge fund index by more than 10%. The Barclay hedge fund index, however, returned –4.45% up to the end of July. Returns such as these are encouraging investors to allocate to CTAs away from other strategies, say managers.
"These are the perfect conditions for CTAs and that is likely to continue for some time. A CTA makes money from price movements, be they within asset classes or from price movements of assets relative to each other. In this evolving global credit crisis, there has been a tremendous shift in relative valuations between currencies, equities, interest rates and derivatives, and those are the ideal conditions for CTA performance," says Patrick Welton, co-founder of Welton Investment Corp, which runs a diversified CTA and global macro portfolio.
Scott Sykora is president of LJM Partners, a CTA that sells options on S&P 500 futures. He says recent market conditions have been perfect for his fund’s strategy. "We are in the best stretch of our existence relative to the performance of the stock market. Despite the steep decline in the stock market, the move downward has been fairly controlled.
