{"id":52456,"date":"2016-05-25T00:30:18","date_gmt":"2016-05-24T22:30:18","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/ctas-robust-in-moderately-challenging-environment\/"},"modified":"2019-12-31T00:45:47","modified_gmt":"2019-12-30T23:45:47","slug":"ctas-robust-in-moderately-challenging-environment","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/ctas-robust-in-moderately-challenging-environment\/","title":{"rendered":"CTAs robust in moderately challenging environment"},"content":{"rendered":"

The last twelve months have shown a dispersion<\/strong> in the returns
\nof CTAs. At the end of Q1 2016, the rolling one-year performance
\nof the SG Trend Index, which measures the performance of the
\ntrend following industry, was -4.1%, whereas the performance
\nof the Lyxor Epsilon Global Trend fund was -1.7% for the same
\nperiod. Over 2015 as a whole the Lyxor Epsilon Global Trend
\nfund returned +5.4% and during Q1 2016 it returned +3.0%.
\n\u201cThe CTAs who did well during this period where those which
\nreduced overall exposures and focused on the few trends
\navailable\u201d<\/em>, explains Guillaume Jamet, principal fund manager
\nof the Lyxor Epsilon systematic trend program.<\/p>\n

Trend following strategies are also
\nreferred to as Commodity Trading
\nAdvisors, or CTAs. They exploit the
\nmomentum effect: prices going up
\n(going down) tend to keep going
\nup (going down). Trend following
\nstrategies work best in environments
\nin which markets show clear and
\nidentifiable trends and in which
\ncorrelations between asset class
\nreturns are low.<\/quote><\/p>\n

The less advantageous market context relates both to
\ncorrelations and on the level of market \u2018trendiness<\/em>\u2019: The Lyxor
\nEpsilon Correlation Index<\/strong> increased from 20% to 24% during
\nthe first quarter of 2016, approaching 26%, which is the
\naverage index value since it was created in 2004.<\/p>\n

\"lyxor_epsilon_correlation_index.jpg\"<\/a>
\nThe index is backward looking: it analyzes some of the drivers of the past performance of trend following strategies, but gives no indication
\nof future results.
\n
Source: Lyxor AM. Data as of 31\/3\/2016 <\/em> <\/p>\n

The Lyxor Epsilon Correlation
\nIndex* uses various return and risk
\nindicators to estimate the correlation
\namongst markets on a rolling 1-year
\nbasis. A low value means that markets
\ntend to move independently, while a
\nhigh value means that markets tend
\nto move in lockstep.<\/quote><\/p>\n

\u201cThis environment clearly was less favorable than the twelve months ending Q4 2015, without becoming worrisome<\/em>\u201d,
\ncomments Guillaume Jamet. <\/p>\n

During the same period the Lyxor Epsilon Trend Index dropped from -2% to -10%. This value is well below 4%, which
\nis the average index value since it was created in 2004. <\/p>\n

\u201cMarkets have been clearly rangy during the lasts 12 months
\ndue to a high level of macro-economic uncertainty. 2016 seemed to start with trends, such as on equities and on oil,
\nbut most of these trends reverted as of late February<\/em>\u201d, tells Mr. Jamet. \u201cModels that adapted to this environment will
\nbe reactive once trends re-occur. The overall exposure level of the Lyxor Epsilon Global Trend fund is below average
\ncurrently.<\/em>\u201d<\/p>\n


\nThe Lyxor Epsilon Trend Index* uses
\nvarious return and risk variables to
\ncalculate the average strength of trends
\non financial markets on a 1-year rolling
\nbasis. A high measure means that, on
\naverage, the financial markets included in
\nthe index have been characterized by a
\nhigher directionality, either downward or
\nupward. A value close to zero corresponds
\nto a regime when most markets are trading
\nrandomly. A low negative index value means
\nthat markets are \u201crangy\u201d on average.<\/quote><\/p>\n

\"lyxor_epsilon_trend_index.jpg\"<\/a>
\nThe index is backward looking: it analyzes some of the drivers of the past performance of trend following strategies, but gives no indication
\nof future results.
\n
Source: Lyxor AM. Data as of 31\/3\/2016<\/em><\/p>\n

Due to their diversification over a broad investment universe and their ability to go short, trend following strategies
\nare amongst the few strategies able to benefit<\/strong> from any macro<\/strong> trend, be it bear equity markets, interest rate hikes or
\ncurrency wars.