Commodity Trading Advisor (CTA) funds generated strong risk- adjusted returns in 2014, according to Zenith Investment Partners CTA and Macro Alternatives Sector Report released last week. However, it may be the underperforming Global Macro funds that fare better in 2015.
Rodney Sebire, Zenith Head of Alternatives Research said “For the 12 months ending 30 September 2014, the average annual return for CTA funds was 17.1%, with a weighted average volatility of 8.3% as measured by Standard Deviation. In comparison, the weighted average return for global macro funds was 0.4%, which was achieved with an average Standard Deviation of 7.3%. The CTA’s have been able to profit from pronounced trends in the bond and energy sectors. Long positioning in the bond sector profited from declining yields in markets, meanwhile short positioning in the energy sector accrued gains as the oil price fell from $US 107 to $US 70 per barrel.
Global macro investing has been more problematic with compressing asset volatilities and zero interest policies, making it difficult for managers to generate returns” said Sebire. “The biggest variable with respect to improved performance is a normalised level of asset volatility and greater performance dispersion across asset classes and regions.
In September and October of this year, we saw some tepid signs that volatility could be returning to more elevated levels.
Looking forward to 2015, Zenith expects the US Federal Reserve to commence its tightening cycle, albeit the timing is unclear. The timing will be contingent on inflation moving closer to the Fed’s target of 2% and a higher utilisation of labour resources. This should provide a broader opportunity set, particularly as macroeconomic policies diverge across regions.’ Sebire said.
“Further deviation between developed markets and emerging markets could also provide attractive opportunities for appropriately skilled global macro managers. Some of the countries that contributed to the instability earlier in the year (Brazil, India, Indonesia, and South Africa) continue to face challenging economic conditions.
A shock in Emerging Market bonds could place pressure on Emerging Market currencies, which ultimately transmit through to equity markets.
In sum, the global macro universe has endured an extremely difficult period. Despite this, the peer group has largely protected capital, with selective managers delivering sound returns. Going forward, we see an improved opportunity set for the strategy, which should prove beneficial for appropriately skilled managers” said Sebire.
Summary of the Zenith 2014 CTA and Macro Sector Review
From an initial investment universe of 24 products, 11 were assigned a positive rating: 1 was rated
“Highly Recommended”; 9 “Recommended”; and 1 was assigned an “Approved” rating.
The following tables highlight:
- Additions to Zenith’s Approved List
- Rating changes, and
- Zenith’s full CTA and Macro sector Approved List
Additions to Zenith’s Approved List:
Fund Name New Rating
Triple3 Volatility Advantage Fund Recommended
Imperia Asia Fund Approved
Rating Changes to Zenith’s Approved List:
Fund Name New Rating Previous Rating
Man GLG Global Macro (AUD) Recommended Highly Recommended
CTA and Macro sector Approved List:
Fund Name APIR Category Rating
AQR Wholesale Managed Futures – Class 1P PER0634AU CTA Recommended
Aspect Diversified Futures Fund – Class A FSF 1086AU CTA Recommended
BlackRock Scientific Global Markets Fund BGL0045AU Macro Recommended
GMO Systematic Global Macro Trust – Class B GMO0006AU Macro Highly Recommended
Imperia Asia Fund IIG0037AU Other Approved
Man AHL Alpha (AUD) MAN0002AU CTA Recommended
Man GLG Global Macro (AUD) MAN0008AU Macro Recommended
MST Global Fund Information Memorandum Macro Recommended
Pengana Absolute Return Asia Pacific Fund PCL0004AU Other Recommended
Triple3 Volatility Advantage Fund GSF0009AU Other Recommended
Winton Global Alpha Fund MAQ0482AU CTA Recommended
