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CTAs: Equity Hedge, Crisis Alpha, Long Volatility – True or False?

2 comments
  • Vikas May 8, 2015 at 7:19 pm / Reply

    Clearly the short term CTAs would stand to be the best fit for portfolio allocations looking for equity hedges/long volatility irrespective of continued trend.

    • Niels Kaastrup-Larsen May 9, 2015 at 6:20 am / Reply

      Hi Vikas,

      Thanks for your feedback. I think the point you make is true, but only in the short term (for a few days). But having said that, the April 2015 correction in Fixed Income and Equities, did not really prove that short-term CTAs were able to provide positive returns. Also, in a longer term equity correction, it is hard to know what the short-term models will be doing as they are not designed to stay in a position that may act as a hedge against equity markets. In that case, medium to long-term trend following strategies may have a better probability to give investors the protection the usually seek during those times.

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