CTAs, as an asset are designed with the aim to offer some level of positive return by investing in all asset classes, most notably equities and bonds, and protection during volatile markets.

Over the last four decades, the ability of managed futures[i] to respond to equity volatility has remained beneficial to asset allocators – but it has declined from its golden age in the 1990s. CTAs remain an important offering for asset allocators seeking uncorrelated returns.

Naturally we propose a theory for this weakening of the beneficial equity smile. And naturally, we propose a real-world answer.

Read our White Paper
Smile! Convexity is not lost…

For interest rates, this asset class remains remarkably resiliant over five decades -– smiling broadly at difficult or even rising bond markets,  to each of two main areas -- equity markets, and interest rates. Our new white paper reviews this as well, and shows that while the smile differs from one interest rate regime to another, over time, it has held up well for the asset class. Want a faster look at what this means to CTA returns over time? We’ve got that, too.

Re-read our short paper
Interest rates go up: a threat or an opportunity for CTA's

The main risks of the strategy are:

Risk of capital loss, equity, risk, currency risk, model risk, volatility risk, leverage risk, credit risk, operational risk, legal risk, interest rate risk, derivatives risk, risks arising from discretionary management and the arbitrage strategy, emerging markets risk, counterparty risk, delivery risk, risk of conflicts of interest, custody risk, risk of changes to the benchmark index by the index provider(s), sustainability risk.

[i] Throughout the three papers in this series so far, we use the terms CTA strategy (Commodity Trading Advisor) and managed futures interchangeably. To examine the CTA market, we refer to the BarclayHedge CTA index.