CTA Index Flat, Currency Leads, and Agricultural Funds Lag

In April 2016, the Barclay CTA (commodity trading advisors) Index remained flat, returning -0.08%. The Barclay Hedge Fund Index, which represents the overall performance of reporting hedge funds, rose by 1.0% during the same time period.

On a year-to-date (or YTD) basis as of April 30, 2016, the Barclay CTA Index had returned 0.92%.

Among all the indexes, the Barclay Agricultural Traders Index remained the biggest loser in April 2016, while the Barclay Currency Traders Index remained the top performer during the same period. The agricultural index fell by 1.2% while the currency index rose by 1.5%.

The poor performance of the agricultural index was mainly due to the reduced productions of a few commodities (DBC). According to the World Bank Report, El Niño–related issues reduced the productions of a few commodities such as rice and palm oil, but the reductions were not sufficient to boost the agricultural index (DBA). Only the currency traders index contributed toward the CTA index’s performance. All other indexes provided negative returns.

The CTA index has provided a diversified portfolio to investors in the current market scenario. The index uses various investment strategies such as taking positions in future contracts and options and shorting contracts when markets (QQQ) (VOO) (IVV) (IWM) are trending downward, thereby providing returns to investors.

The HFRX Macro Commodity-Agriculture Index provided a -2.3% return in 1Q16. The HFRX Macro Commodity-Metals Index rose by 6.5% in 1Q16. The iShares Currency Hedged MSCI Emerging Markets ETF (HEEM) rose by 11.6% from February 11, 2016, to May 25, 2016.

Commodities tend to perform well during the late stages of the business cycle. If we’re in a late stage now, commodities-focused CTAs should perform well. For a closer look at where we are in the current business cycle, you can read Richard Bernstein on Stock Drivers, Gold, and ETFs.