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CTA/Managed Futures Classification

CTAs is the most common manager type in the database and we have devoted a separate page to explain the taxonomy in this group.

Managed futures classification

CTAs (also known as Managed Futures), are formally managers registered with the CFTC and the NFA. Informally, these are Futures managers that are managing assets for clients. In this category, you will find Global Macro, Systematic Macro, Trend Following, and a variety of styles with exposure to the global markets. We may include manager that is not registered with the US regulators if they are driven by futures trading.

  • Systematic – Rules-based managers seeking to exploit strategies that are based on coded rules. These managers are typically diversified over a larger number of markets.
  • Discretionary – Managers using judgment when it comes to taking market risk. These managers are often more concentrated to certain trades.
  • Fund of Funds – a manager that allocates to other strategies. In the Managed Futures space, this is typically done through managed accounts offering strong transparency to the manager of managers.

Systematic Strategy Classification

Managed futures, detailed classification strategy

Within the Systematic classification, we have the following strategies:

  • AI – Managers using artificial intelligence or machine learning to extract signals from markets. Sometimes, this is also called pattern recognition or similar terms. But pattern recognition may not always be an AI technology, in those cases, the manager is sorted under a different category.
  • Behavioral – Strategies seeking to exploit repetitive behavior from human investors and speculators.
  • Contrarian – A manager seeking to predict market turns, trading in an anticipatory way.
  • Fundamental – Often, this is also called a systematic macro manager and relies on a broader set of data inputs in addition to price, which is the most common input for the other strategies. In this category, we also find Global Tactical Asset Allocators.
  • Market Neutral – A manager that strives to be neutral to the market, often by using intra or inter-market trades. In commodities or fixed income, positions along the curve are often traded. The latter managers are also called spread traders. This category may also be referred to as Relative Value.
  • Multi-Strategy – Managers that are allocating to several strategies, preferably uncorrelated strategies. Typically, this is the classification for strategies that are not “style pure” but rather allocates to a set of different return streams.
  • Options Strategy – Strategies that are using options or volatility-related instruments to express views or strategies in the market.
  • Option Writer – A strategy that sells options, often in an attempt to exploit the volatility premia – the difference between implied and realized volatility. Most commonly this strategy has catastrophic downside when realized exceeds implied.
  • Short Term – Strategies that hold positions for a few days or even intraday. These managers are typically capacity-constrained but can offer uncorrelated return streams.
  • Trend Following – the most common strategy in the CTA space, strategies that seek to exploit momentum in markets over various time horizons.

Discretionary Strategy Classification

In most cases, a discretionary CTA is a Global Macro strategy. To call yourself a Macro manager or a CTA is often a marketing choice. Most Macro managers are registered with the CFTC and are almost always a CTA from a regulatory perspective.

  • Fundamental – The classical Global Macro manager analyzes economic fundamentals and takes positions across the market based on the perceived strength or weakness of a particular market.
  • Market Neutral – Relative manager, striving to stay neutral to the general market direction.
  • Multi-Strategy – combining several uncorrelated strategies, sometimes also multiple discretionary Portfolio managers sharing a common book. In this category, we typically place strategies that mix systematic and discretionary strategies.
  • Options Strategies – an option strategy is deployed to fine-tune bets on markets. Sometimes this also includes VIX-based strategies.
  • Option Writer – a discretionary implementation of a risk premia strategy, selling optionality to some degree, to earn the positive carry.
  • Short Term – a strategy that tries to exploit short-term market movements.
  • Technical – Discretionary implementation and signal selection of either technical indicator or system-supported trading strategies.