Hurtling down the track

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Fast-moving CTA engine proves vulnerable to short-term volatility

By Pete Gallo

Managed futures are the best-performing hedge fund strategy this year, thanks to runaway physical commodity and energy prices. Yet, as the month of April demonstrated, this year's racy commodity trading advisory machine is vulnerable for two reasons. Shorter-term market corrections are inevitable. And other than taking cash off the table, trend-following futures funds inherently lack an effective way to hedge their bets.

In April, interest-rate volatility caused returns to buckle for many players trading financial futures, leaving the Absolute Return CTA