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Managed Futures and CTA Managed Futures and CTA

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January 25, 2009
January 25, 2009
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Explanation of the Managed Futures and CTA strategy classes

The question, whether Commodity Trading Advisors (CTA) represent a class of hedge funds, has been debated for a long time. Legally, the status of CTAs is completely different from hedge funds, because formally CTA is simply a person, who advises others as to the advisability of buying or selling commodity futures or option contracts. However, from the technical point of view, CTAs exploit various trading strategies similar to hedge funds, therefore their managed accounts could be analyzed and included to a hedge FoF basket the same way.

Furthermore, many hedge fund managers, who used to run managed accounts, consequently, report their performance as a pro-forma for the hedge fund. In other words, it means that a hedge fund investor may indirectly invest to managed accounts hidden behind a hedge fund vehicle. To summarize, when building a hedge FoF, it barely matters, that CTAs represent a different legal organization than hedge funds. As long as the selected CTAs satisfy the given quantitative and due diligence criteria, we may include them into a hedge fund universe as potential components for a FoF composition.

There is a debate over whether CTAs. CTAs typically are trend followers that trade commodity, equity, financial and currency futures contracts. Managers can trade from a technical or fundamental perspective, long term or short term, using a systematic or discretionary method.

Article is in the following categories:
Quant KB » Due Diligence» Hedge Fund Strategies

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