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A closer look at what worked – Q1 2022

By now, we know that CTAs managed to outperform significantly in the first quarter of 2022. In particular, the most common strategy, Trend Following, and closely correlated sub-strategies delivered competitive performance. With more than 300 CTA strategies and 1300 other funds reporting returns, we can now dive a little bit deeper into performance for the first quarter.

Dispersion for different Hedge Fund Strategies

As seen above, close to 75% of the CTAs have generated positive returns for their investors in the first quarter of 2022. The opposite is true for many other hedge fund strategies, where half or more of the managers in other strategies are negative for the year. As an explanatory note, the red dot represents the 25th percentile performance, the blue dot the 50th percentile (Median), and the green dot, the 75th percentile, ranked by performance.

Average YTD and MTD performance broken down per CTA sub-strategy

Using the average numbers of each sub-strategy, a non-surprising fact is that Option Strategies/Writers have suffered, which is perhaps not unexpected given the volatility expansions that we have seen. Market Neutral strategies, occasionally referring to spread trading in commodities, have not faced an easy market with several abrupt spread moves due to the supply disruptions relating to the Ukrainian – Russian war. While not yet in the numbers, the Chinese Covid lockdown may create difficult trading conditions for them in April as well.

Option strategies did well in the prior year, as they showed a remarkable lack of volatile equity markets.

Dispersion for sub-strategies with the CTA universe

As the average is not the median and is not the typical experience by an investor, we dig further into the distribution. An observation is that the average above, is typically higher than the median value, indicating a positive skew for some managers, dragging the average value higher. The median Trend Following CTA has a performance that is better or equal to the top quartile for other sub-strategies. Not bad. Style is determining the outcome.

Scatter Plot for the larger manger, showing a positive skew

What will make institutional investors, is that a large amount of the large managers have delivered strong returns. To explore which CTA did well, we can recommend the CTA Performance RankingThe NilssonReportBest and Worst CTAs, and our Dispersion Report.