Positioning - "CTA" is a formal status
TRANSTREND is a specialized investment advisor in a regulated
discipline named "Managed Futures". In the USA it is registered as
a Commodity Trading Advisor ("CTA"). Americans use the words
"futures" and "commodities" interchangeably. Futures include financial
futures and (tangible) commodity futures. Futures may include
options on futures contracts. Futures in a broader sense may also
include standardized forward contracts in the OTC market.
Investment universe
- Well known traditional asset classes include Fixed Income
(e.g. bonds), Equity (e.g. stocks), Convertibles and
Real Estate.
- Non-traditional asset categories include Alternative
Investments. These include Private Equity, Venture Capital and Hedge
Funds.
- Structured Notes or Protected Investment Notes are investment
instruments that may include any of the categories, traditional or
alternative.
Hedge Fund Styles
Hedge Funds can, for instance, be sub-divided in Equity Market
Neutral, Long/Short Equity, Event Driven, Emerging Markets,
Convertible Arbitrage, Dedicated Short Bias, Global Macro and CTAs
(or Managed Futures).
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The sub group named Global Macro sometimes includes CTAs.
However, because Global Macro and CTAs also have distinct
differences, others define CTAs as an alternative asset category by
itself.
Differences between Global Macro and CTAs
- CTAs are regulated (by CFTC and NFA).
- CTAs mainly use contract markets (i.e. futures and options
exchanges) as opposed to OTC markets.
- CTAs tend to be much more diversified as opposed to
concentrated exposures.
- CTAs tend to be much more systematic as opposed to
discretionary.
- CTAs offer significantly more transparency (e.g. mandatory
disclosure document).
- CTAs usually do not borrow.
Characteristics of hedge funds and CTAs in particular
- Flexibility to go long, short or have no position.
- Use of derivatives, like futures and/or options or swaps.
- Not too narrow investment mandate (main objective is to
consistently make money over time).
- Application of leverage.
- Profit sharing by the manager (performance
fees).
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