CTAs Spark Investor Interest
During the past couple of weeks, BHA has spoken to many investors that are looking for CTA funds. In fact, 48 percent of hedge fund investors interviewed had an open mandate for CTA funds or were considering them.
Investors have had on-again, off-again relationships with CTAs as they have struggled to reconcile CTAs’ outperformance of volatile markets with their relatively high standard of deviation. However, CTAs’ performance in 2008 along with their ability to offer transparency and liquidity, have renewed investor interest. Oliver Wriedt, senior managing director of Sciens Capital Management, recently noted: “Sciens did not have any problems redeeming from CTAs in 2008 and is not aware of any CTAs that imposed gating provisions or were unable to meet redemption requests.” (See, “What Goes Up May Come Down,” Hedge Funds Review, May 1, 2009.)
A government pension fund located in North America told a Brighton House analyst that it is always looking for CTA funds. It requires daily to weekly liquidity, full transparency, and a percentage breakdown of strategy, region, and asset-class exposure.
A fund of funds located in the United States has an open mandate for short-term trading CTAs with low correlation to other CTA funds. The fund of funds requires monthly liquidity, and while it does not have specific transparency requirements most of its managers allow for daily transparency.
Liquidity and transparency continue to be major concerns for investors. Therefore, BHA expects investors to remain interested in CTA strategies.