How have trend following hedge funds known as Commodity Trading Advisers CTAs adjusted?

1 year ago

Trend-following hedge funds, specifically Commodity Trading Advisers (CTAs), have shifted their strategies in response to evolving market dynamics. These hedge funds, which rely on algorithmic models to guide their trading across various markets, have recently increased their exposure to equities to the highest levels since before the pandemic.

This shift comes as market volatility has decreased, and stocks have risen on the expectation that interest rate hikes are nearing their peak. CTAs, managing significant assets, have shifted from net short to net long futures positions on major indices like S&P 500, Euro Stoxx 50, FTSE 100, and Nikkei 225.

Their move to raise equity holdings has been driven by reduced volatility, coupled with positive market trends, aligning with their strategy to follow both volatility and trend signals. However, their increased equity exposure also means they might contribute to market sell-offs if volatility suddenly spikes.

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