uploads///Performance of Barclay Hedge Fund Index versus CTA Index

Hedge Funds Outperformed in April: Are Trends Breaking?


Jun. 7 2016, Updated 12:55 p.m. ET

Hedge funds outperformed CTAs

In April 2016, hedge funds outperformed CTAs (commodity trading advisors).

The Barclay CTA Index, which reflects the performances of CTAs, fell by 0.07% in April. The Barclay Hedge Fund Index, which reflects the performances of reporting hedge funds, rose 1.0% during the same period.

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How hedge funds outperformed CTAs in April

Hedge funds use different strategies to generate active returns. Hedge funds always make use of leveraging in both domestic and international markets to generate high returns. The primary goal is to generate returns while minimizing volatility.

Hedge funds start to lose when the Market (QQQ) (IWM) (IWF) is highly volatile. The PowerShares QQQ Trust, Series 1 ETF (QQQ) fell by 11.8%, the iShares Russell 2000 ETF (IWM) fell by 12.6%, and the iShares Russell 1000 Growth ETF (IWF) fell by 10% from January 1, 2016, to February 11, 2016.

CTAs work better in a highly volatile market. CTAs use different strategies such as taking positions in future contracts and options and shorting contracts when markets are following downturns, thereby providing returns to investors. Broadly speaking, they perform well when trends are the strongest.

However, in April, hedge funds outperformed the CTA index. Worldwide (ACWI) (VTI) (VEU), central banks’ dovish policy stances helped the funds to provide such returns.

In this series, we’ll discuss the various strategies used by hedge funds and CTA indexes. We’ll also look at various funds that provided decent returns in April.


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