European CTA pioneer, Man AHL, turned 30 this year. Over this period, managed futures – and Man AHL strategies – have generated better risk-adjusted returns than world equities, and with smaller drawdowns. In particular, managed futures have sometimes produced substantial positive returns, during crisis periods when equities crashed. The TMT bubble bursting between 2000 and 2003, the Russia/LTCM crisis in 1998, the credit crisis in 2008, the European sovereign debt crisis in 2011, are all good examples of how CTAs zigged when equities zagged.
There are sound reasons to think that trend-following alpha could be persistent and sustainable, over the long run. Man AHL’s Head of Client Portfolio Management, Graham Robertson, enumerates “behavioural finance teaches us that humans fall prey to biases, such as selling winners too early. Slow dissemination of, and under-reaction to, new information means it can take weeks or months to percolate into markets. And long-term macro cycles – both in terms of monetary policy and business cycles – move very slowly, again over multi-year periods.”