Crisis Alpha – Lag before the Pop.

To download the Auspice March Blog, click here.In Q1 2025 equities came under moderate selling pressure. As of March end, the S&P500 had an approximate 10% peak to trough drawdown and is down 5% year to date. Auspice has outperformed, protecting capital in Auspice Diversified and even delivering positive performance in Auspice Broad Commodity and linked ETFs (COM/CCOM). What about the strong, double-digit performance Auspice Diversified has delivered during prior equity corrections? “Crisis Alpha” typically occurs during meaningful equity selloffs. When equity markets first start to turn over from highs, trends in equities and other economically sensitive markets are often in transition. As corrections become more meaningful, liquidity driven trading, emotions, and “risk-off” typically leads to non-correlated trend following opportunities.Consider Table 1 below with historical SG CTA performance during the first 10% of a S&P 500 drawdown. As you can see, our financially focused CTA peers have on average lost 3% when the S&P 500 has traded down 10% from highs. While negative, CTA peers deliver a better result than equity beta.Table 1: SG CTA peer performance through the first 10% of a S&P 500 drawdown:


























 
























































































 


Source: DBi and Auspice. You cannot invest directly in an index. However, as a selloff becomes more significant, trend-following CTAs have been a reliable source of crisis alpha. Note the gold boxes in Table 1 above. In these four periods the S&P 500 correction reached 20%. As you can see below in Table 2, performance during these meaningful corrections is strong.Table 2: SG CTA peer performance when S&P reaches -20%:


























 
























































































 


Source: Potomac and Auspice. You cannot invest directly in an index.A similar pattern is observed if we look at the worst 10 months and worst 10 quarters for the S&P 500 since 2007 (Auspice Diversified inception). See Table 3 below. In the worst 10 months, the average performance of the S&P 500 is -9.2%, a moderate or even routine correction. Our CTA peers do well on average, protecting capital with the BTOP50 and the SG CTA benchmarks up +0.3% and +0.5% respectively. Auspice Diversified on the other hand outperforms, up an average of +2.9%.Table 3: BTOP50 CTA, SG CTA, and Auspice Diversified performance during the worst 10 S&P 500 months:


























 
























































































 


Source: Auspice Capital and Bloomberg. You cannot invest in an index. As equity selloffs become pronounced, we see stronger crisis alpha from both CTA peers and Auspice Diversified – strong offsetting performance when you need it most. See Table 4 below.Table 4: BTOP50 CTA, SG CTA, and Auspice Diversified performance during the worst 10 S&P 500 quarters:


























 
























































































 


Source: Auspice Capital and Bloomberg. You cannot invest in an index. You may have noticed we often refer to “crisis alpha”, but not “tail hedge”. Tail hedge typically has a much more negative equity correlation, approaching -1.0. Tail hedge is typically expected to deliver strong offsetting performance with a high degree of reliability, albeit also with negative long-term returns. This has proven not practical and uninvestable for most investors.Table 5: Trend Following CTAs receive 5-10% of many US pensions long term asset allocation.






















































































































Source above: “The Institutional Use of Commodities & CTAs”, Auspice. Published November 2021 and data as of then. SJCERA is San Joaquin Country Employees’ Retirement Association. ERSRI is Employees’ Retirement System of Rhode Island. HIERS is the State of Hawaii Employees’ Retirement System. Illinois SURS is the State Universities Retirement System of Illinois. CalSTRS is California State Teachers’ Retirement System.What will happen going forward? We do not have a crystal ball. Auspice strategies have a defensive positioning today with positive performance recently as equities continue to come under pressure.  But the recent lag versus equity recent is historically normal and often followed by a pop in the right direction.If you don’t have a 5-10% allocation to CTAs strategies, or are not at your target weight, now may be an opportune time to rebalance out of recent equity strength and into CTAs. For further information email us today at [email protected]. DEFINITIONS  Indexes·         The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.·         BTOP Index (Barclay CTA Index): The BTOP Index is a benchmark for managed futures programs, specifically tracking the performance of the largest Commodity Trading Advisors (CTAs) who employ systematic, trend-following strategies. It is constructed and maintained by BarclayHedge and aims to reflect the representative performance of active CTA managers.·         SG CTA Index (Société Générale CTA Index): The SG CTA Index is a performance benchmark for the largest CTAs selected by Société Générale, based on assets under management. It includes 20 CTAs and is equally weighted and rebalanced annually, representing a broad view of the managed futures industry. IMPORTANT DISCLAIMERS AND NOTESThere is a substantial risk of loss in trading futures and options. Past performance is not necessarily indicative of future results. The returns for Auspice Diversified Trust ("ADT") are “net” (including management and performance fees, interest and expenses). Returns represent the performance for Auspice Managed Futures LP Series 1 (2% mgmt, 20% performance) including and ending November 2019. 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