Trend-Chasing Quants Catch a Break From Abysmal 2017 Returns

This year has been unkind to a swath of systematic trading strategies. But one of the largest categories is showing signs of life.

CTAs -- cross-asset quants that generally profit from clear market trends -- gained 1.7 percent in August, according to a Societe Generale SA index, compared to a 0.5 percent increase over the month by the main U.S. equity gauge. The funds are on track to post their second consecutive monthly gain for the first time in more than a year.

In June, the category had its worst month since 2014, stumbling amid a selloff in several asset classes. The rebound over the past two months has come from “profiting from a short USD and long U.S. rates trade,” Mark Connors, global head of risk advisory at Credit Suisse Group AG, wrote in a note to clients Thursday.

CTAs -- short for Commodity Trading Advisor, the regulator label for firms with permission to trade futures or options -- only take a position after a trend appears, unlike a discretionary manager who tries to predict where markets are headed. They manage about $108 billion, according to data compiled by Barclays Plc.

Periods of relatively solid gains, followed by widespread pain, aren’t unusual for this quantitative style. Investors make money riding the wave until there’s a shock, making CTAs one of the more volatile strategies.

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