A common Wall Street adage runs, “the trend is your friend.” Skeptics sometimes add to that the words, “…until it isn’t.” Commonfund has issued a new white paper that illuminates both sentiments, in the course of contending that futures funds managed by Commodity Trading Advisors (CTAs) can play a valuable part within institutional policy portfolios. In particular, the authors, from Commonfund’s Hedge Fund Strategies Group, seek to defend managed futures against the charge that they are invidiously opaque, a “black box.” CTAs got their start as vehicles for following trends (“taking positions and letting profits run while cutting losses short” as the white paper puts it) and this still remains their most common model type. This subset of CTAs in particular, then, is much more transparent in their operations then its “discretionary, thematic counterparts.” CTAs are data driven, and the data by which they are driven is available to the rest of the world.
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