There are some eye-popping March returns for managed futures programs hitting our inboxes this month, whether Auspice’s +8%, EMC’s +9%, or Quest’s +13% (you can learn more about each of those managers in our recently published trend following whitepaper here.) This broad success across many managed futures and trend following programs has pushed SocGen’s CTA Index to its best monthly and quarterly performance in 20 years (when a little thing called the dot.com bust drove returns).

Past performance is not indicative of future results.

 

Well, we can sit here and say, who knows, this could be the start of a new commodity supercycle, or this could be the end of a multi-decade downtrend in interest rates… with years of rising interest rates on the horizon. This could be the first real inflation shock the US has had since the 1970s, and this could be our first real bear market since the GFC. And, of course, all of those narratives could flip on a dime… reversing these trends and causing losses.

But what if we set aside the narratives and instead look at the data. From many of our podcasts with volatility traders, we know that volatility clusters – whereby more volatility begets more volatility. What about the slightly different type of volatility (directional volatility due to expansions of ranges and price movement into new areas). Does that cluster? Does a strong trend following environment portend continued strength? Or a reversion to the mean? Our experience with the strong 2008 period followed by struggles in 2009 tells us one thing, but the data tells us another.

When analyzing the next quarter, two quarters, next 1 year, and next 3 year periods from the top 5 performing quarters listed above – managed futures did better than their longer-term average. That tells us it is not too late to get involved in the space, but rather right on time!

Past performance is not indicative of future results.