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Aspect Stays True to Trend Non-trend strategies launched separately

(L-R): Martin Lueck, cofounder and Research Director, and Anthony Todd, co-founder and CEO

Trend-following CTAs have seen a resurgence in performance since 2014, and are, as of February 2016, producing strongly positive performance against a challenging backdrop for many hedge fund strategies. Some CTAs blame QE for their lacklustre performance between 2009 and 2013, but Aspect Capital argues that this phase was not an aberration. “QE has generated some strong trends including the US stock-market, the Nikkei, the Yen and the Eurozone crisis,” points out cofounder and CEO Anthony Todd.

The CTA community sponsors academic research and Aspect is no exception, having commissioned Mark Hutchinson and John O’Brien of Cork University to research a study called Is this time different: Trend following and financial crises. The research simulated trend following performance over 100 years and concluded that it is perfectly normal for the strategy to generate poor returns for around four years after a financial crisis. Reflects Aspect cofounder and Research Director Martin Lueck: “The early 1990s period in the US was analogous to QE in that there was substantial intervention to clean up the savings and loans crisis. Trend followers had a dull period but then it came roaring back.”

Aspect has been outperforming stocks, bonds and the CISDM index of managed futures, both recently and over much longer lookbacks, as shown below. The flagship programme marked a fresh high watermark with its 32% performance in 2014, and then advanced another 7.9% in 2015.

Aspect differentiators

Performance apart, what differentiates Aspect from the many hundreds of other CTAs and managed futures funds? Longevity is one factor. Aspect was cofounded in 1997 but its track record dates back much longer to the early 1980s. Winton and Man AHL can also boast track records of comparable duration, not least since they and Aspect came from the same stable; David Harding was the ‘H’ in AHL, while Aspect cofounders Michael Adam and Marty Lueck were the ‘A’ and the ‘L’. Lueck reckons London is a global centre of excellence for CTAs mainly because AHL’s strong research ethos has helped to spawn many other CTAs that continue to invest heavily into research and systems. The three firms have all evolved in different directions and consequently their return profiles have become less correlated. Man Group has, for instance, diversified its investment universe for some strategies into non-exchange traded markets. Winton has, in contrast, for many years been moving away from momentum, or trend following. Aspect has done neither of these things.

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