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A strong month?

Much is pointing in the direction that CTAs had a strong September, with a preliminary estimated return of 2.6%. The fourth quarter is typically a strong period, and we may potentially hope for some strong performance here.

Here CTAs did what they were expected to do. provide offsetting returns to challenged equity markets. It is a narrative that does not always hold but it is good to see that the strategy is able to pick up uncorrelated returns as the FED infused some pessimism.

Market Neutral strategies are a close second, and here we see solid and uncorrelated returns from a strategy that has made a comeback since 2020. The disappointing returns from value and investors’ exit have given the strategy room to create positive returns. Of course, the changes in the FED stance have also helped a lot.

The short bond trade was the gift that kept giving. Bonds continued to trade down as the FOMC reinforced the message that they kept rates higher for longer. Using our statistical decomposition of CTA returns, we infer they are lightly exposed to equity risk, modest short bonds, and the shortish the USD. The most significant recent change is the increasing Energy position. Crude and distillates continued to trade higher and Trend Followers followed the trend.

Doing the same for the star performer of the year, outpacing their brethren in Long/Short Equity by a smidgen are the Market Neutral managers. Here we note while there is some occasional correlation to various global markets, the overall beta is near zero in almost all markets.

After a few disappointing months, Crypto strategies seem to have a relatively calm month, with a modest positive number. Most of the gains that we saw in the early part of the year have melted away.

This update is based on data as of Thursday the 28th. With one trading day left, results might have changed when we look at the final result. Feel free to join our email list if you want to stay updated on aggregated performance and various other topics relating to CTA and Hedge Funds.

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