The broad-based market upswing in the first half of July has benefitted risk assets globally.
That follows the release of better than expected economic data in the US and China,
suggesting that fears over the strength of the global recovery have been exaggerated.
During the Brexit, the average CTA did very well: the SG Trend Index, a
performance indicator for trend-following strategies, jumped 2.9% on 24 June. Trend-following strategies outperformed both equities, with the MSCI World Index dropping 4.9%, and hedge funds in general, with the HFRX Global Hedge Fund Index shedding 1.1%.
The first quarter of 2016 has seen the conjuncture of a significant rise in the Epsilon
Correlation Index with a drop of the Epsilon Trend Index, confirming a moderately
challenging environment for trend following strategies over the last 12 months.
Those CTAs with the right approach resisted.
Over two thirds of respondents of the Deutsche Bank annual Alternative Investment Survey invest in systematic strategies, including one in every two who plan to add to one or more quantitative sub-strategies in 2016. The largest investment consultants and pension funds are driving demand: 45% of these respondents plan to add to one or more systematic strategies, including quantitative equity market neutral, CTA, quantitative macro, quantitative equity and quantitative multi-strategy.
Readers of financial news may believe that ‘market corrections', or ‘shocks',
or ‘five-sigma events' are more common than they used to be. Winton Capital Management look at the historical data for a number of financial markets and find that there is no evidence for increasing instability over the past 60 years.