Allocations to CTAs by Institutional Investors

According to Don Steinbrugge of Agecroft Partners, managed futures funds run by commodity trading advisers (CTAs) are becoming more attractive investments for institutional investors.  Hedge funds using this strategy hold of 15% of assets under management for all hedge fund strategies.  During the internet and credit bubble of 2000-2002 and 2008, CTAs generated positive returns while stocks were down significantly.  In 2008, returns for various asset classes were:

• Barclays CTA Index +14%
• Dow Jones - UBS Commodity Index -35%
• US equity -40%
• Emerging market equity -50%
• High yield bonds -30%

The advantages of CTAs are liquidity on a monthly basis, transparency, risk management and good infrastructure (research, technology, operations and legal/compliance).  Some CTAs have weekly or daily liquidity.  More information about managed futures can be found here.

The source for this post can be found here.