For CTAs, a Disastrous August Produced Mixed Results

Trend-following funds found themselves down but not out. Money was made going short commodities and long Treasuries. Equities hurt.

CTAs, or commodity trading advisers, and other computer-powered hedge funds posted mixed results during the stock market’s huge sell-off in August.

However, this does not necessarily mean funds designed to zig when the stock market zags failed to deliver. These so-called trend followers, which posted big gains in the 2008 market meltdown, really need to be judged over a longer period since many of their models are not designed to abruptly reverse when a trend quickly changes direction.

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