Tuesday, January 31, 2023

Speed tops agenda for CTAs building on stellar 2022


  • Aspect Diversified rose 41% but CEO Todd wants to improve response times
  • Trend-following high on investor radar after major return to form in 2022
  • Listen to the Anthony Todd interview on Apple here and Spotify here

CTA managers are seeking to improve response times in trend-following to build on last year’s resurgent performance, which shot the strategy up investor agendas.

Aspect Capital’s CEO, Anthony Todd, told AFI that improving the short-term response of trend strategies “in situations where we see those sharp market corrections” was a top priority in 2023.

Diversified, which has an 80% trend-following focus, rose 40.5% last year, ahead of the 27% average posted by large trend funds, as tracked by Societe Generale.

It has been “a strong clarion call over the past five years” that going faster is more advantageous, he said, citing the start of the Covid-19 outbreak in Spring 2020, when many trend-followers were stung by the market reversal.

Aspect seeks to improve its responsiveness rather than increase exposure to short-term strategies, he added. “Our firm conviction is that it is important to have that balance across the broad filter set.

“The aim is to improve those faster filters to make them more resilient over a range of market environments.”

Their focus on speed is not unique among CTA managers, buoyed in many cases by record performance last year and the most investor interest in the strategy since its mainstream breakthrough after 2008.

“Faster trend systems have attractive risk-management properties and are more complementary to traditional investments than slower systems,” found Man Group, which owns the AHL suite of systematic funds, in a note this month.

“Faster trading potentially delivers greater risk-management properties, but at some cost to Sharpe ratio. However, this can still be particularly advantageous when combined with traditional investments because of the consistent low or negative correlation over the long term.”