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New Alternative Edge Snapshot

Overview of the CTA mutual fund universe

In recent years there has been a significant increase in the availability of managed futures products through alternative structures such as 40 Act mutual funds, UCITS, and even ETFs. The largest growth has been seen in the United States, which has witnessed an approximately five-fold increase in assets over the last five years alone, with a similar increase in the number of products. This snapshot describes the growth in the space and details the types of CTA strategies that are available in a mutual fund format. It also provides an evaluation of the performance of these new products in comparison to our newly created SG CTA Mutual Fund Index.

Fig.1 Growth history of CTA mutual funds
Source: SG CIB, Bloomberg

Growth of CTA mutual funds

CTAs are one of the most liquid alternative investment strategies due to the liquidity of the underlying markets that they trade, which renders them as ideal candidates to be made available in the US 1940 Act mutual fund format. They also provide valuable diversification benefits to a traditional portfolio, and these, among other factors, help explain the significant growth seen in mutual funds employing managed futures strategies.

Assets under management (AUM) have increased approximately five-fold in the last five years to reach $26 billion at the end of March 2016 (Fig.1, top). This significant growth has been an important component of the overall CTA industry development, as managed futures mutual funds now account for more than 7% of the total CTA AUM. Furthermore, the significant growth over the last five years by the CTA mutual funds compares to a 22% growth by the CTA industry overall during the same period.

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