Key Takeaways
- • Société Générale's SG CTA Index rose 2.88% in February 2021, reversing a 1.14% decline in January and lifting its year-to-date gain to 1.64%.
- • The SG Trend Index, tracking the 10 largest trend-following hedge funds, surged 3.64% in February after a 0.75% drop in January, and is up 2.86% year to date.
- • The SG Short-Term Traders Index rose 3.13% in February, its best month for shorter-term CTA strategies in aggregate since January 2018, and is up 1.45% year to date.
- • All three of SocGen's main CTA and trend-following indices finished February in positive territory, driven by bond market declines, rising commodity prices led by crude oil, and equity gains.
- • Eight of the 10 individual short-term CTA constituents contributed positive performance in February, with the best manager posting double-digit gains.
Summary
Managed futures hedge funds and short-term trading strategies rebounded strongly in February 2021, with each of Société Générale's three main CTA and trend-following indices finishing the month in positive territory, according to SocGen's monthly review published on Friday. The strategies, which trade market trends across equities, bonds, commodities and currencies, typically using computer-based algorithms, had suffered losses in January.
The recovery was driven by downward momentum in bonds, rising commodity prices, especially crude oil, and stock market gains. The broad-based SG CTA Index, which measures the daily performance of 20 of the largest managed futures hedge funds, rose 2.88% in February, reversing January's 1.14% decline, and is up 1.64% so far in 2021.
The SG Trend Index, which tracks the 10 biggest trend-following hedge funds, performed even better, gaining 3.64% in February after a 0.75% fall the previous month. It is up 2.86% year to date. Tom Wrobel, director of capital consulting at Société Générale Prime Services and Clearing, noted that the index had earlier peaked at a mid-February high of 7.42%, driven by strong equity returns. Those gains eroded slightly as rising bond yields and inflation concerns disrupted momentum and markets retrenched.
Short-term trend-following strategies also returned to positive territory. The SG Short-Term Traders Index, a daily returns snapshot of CTAs and global macro managers with 10-day trading windows, rose 3.13% in February. That was the best month for shorter-term CTA strategies in aggregate since January 2018, and the index is up 1.45% since the start of the year. Eight of the 10 individual short-term CTA constituents posted positive performance, with the best manager recording double-digit gains.
Wrobel described the performance as "fantastic" and said institutional interest in CTAs remains high. He noted that a range of CTA strategy types, including non-trend machine learning and shorter-term programs, benefited from February market conditions, with the shorter-term programs recording their strongest monthly performance in three years.
The recovery was driven by downward momentum in bonds, rising commodity prices, especially crude oil, and stock market gains. The broad-based SG CTA Index, which measures the daily performance of 20 of the largest managed futures hedge funds, rose 2.88% in February, reversing January's 1.14% decline, and is up 1.64% so far in 2021.
The SG Trend Index, which tracks the 10 biggest trend-following hedge funds, performed even better, gaining 3.64% in February after a 0.75% fall the previous month. It is up 2.86% year to date. Tom Wrobel, director of capital consulting at Société Générale Prime Services and Clearing, noted that the index had earlier peaked at a mid-February high of 7.42%, driven by strong equity returns. Those gains eroded slightly as rising bond yields and inflation concerns disrupted momentum and markets retrenched.
Short-term trend-following strategies also returned to positive territory. The SG Short-Term Traders Index, a daily returns snapshot of CTAs and global macro managers with 10-day trading windows, rose 3.13% in February. That was the best month for shorter-term CTA strategies in aggregate since January 2018, and the index is up 1.45% since the start of the year. Eight of the 10 individual short-term CTA constituents posted positive performance, with the best manager recording double-digit gains.
Wrobel described the performance as "fantastic" and said institutional interest in CTAs remains high. He noted that a range of CTA strategy types, including non-trend machine learning and shorter-term programs, benefited from February market conditions, with the shorter-term programs recording their strongest monthly performance in three years.
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