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The crisis alpha of managed futures : myth or reality?

Raheel Asif (UGent) , Michael Frömmel (UGent) and Alexander Mende
(2022) INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS. 80.
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Abstract
We examine whether commodity trading advisors (CTAs), or managed futures, provide investors with diversification benefits in times of crises, along with looking into the source of such a “crisis alpha”. We developed a systematic crisis identification methodology that takes into account both, the magnitude and the speed of price deterioration and apply it to a unique dataset, that includes realized returns and sector positions of CTAs on a daily basis. We find CTAs do acquire positive gains in most sectors during crises, which originate from two sources: Firstly, their diversification across multiple futures markets, i.e. positive yields in gaining markets can counterbalance low performance in the crisis market. Secondly, the fast reduction in CTAs' exposure to crisis markets (in less than 15 days for composite indices) allows them to stabilize their performance. Both factors together, quickly cutting losses in crisis sectors while staying profitable in the other ones, allow CTAs to generate crisis alpha.
Keywords
Market timing, Commodity trading advisors, Crisis alpha, Managed futures, HEDGE FUND PERFORMANCE, DURATION DEPENDENCE, RISKS, TRATEGIES, RETURNS, STOCK, TIME, GOLD, BULL

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MLA
Asif, Raheel, et al. “The Crisis Alpha of Managed Futures : Myth or Reality?” INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, vol. 80, 2022, doi:10.1016/j.irfa.2022.102045.
APA
Asif, R., Frömmel, M., & Mende, A. (2022). The crisis alpha of managed futures : myth or reality? INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, 80. https://doi.org/10.1016/j.irfa.2022.102045
Chicago author-date
Asif, Raheel, Michael Frömmel, and Alexander Mende. 2022. “The Crisis Alpha of Managed Futures : Myth or Reality?” INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS 80. https://doi.org/10.1016/j.irfa.2022.102045.
Chicago author-date (all authors)
Asif, Raheel, Michael Frömmel, and Alexander Mende. 2022. “The Crisis Alpha of Managed Futures : Myth or Reality?” INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS 80. doi:10.1016/j.irfa.2022.102045.
Vancouver
1.
Asif R, Frömmel M, Mende A. The crisis alpha of managed futures : myth or reality? INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS. 2022;80.
IEEE
[1]
R. Asif, M. Frömmel, and A. Mende, “The crisis alpha of managed futures : myth or reality?,” INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, vol. 80, 2022.
@article{8738763,
  abstract     = {{We examine whether commodity trading advisors (CTAs), or managed futures, provide investors with diversification benefits in times of crises, along with looking into the source of such a “crisis alpha”. We developed a systematic crisis identification methodology that takes into account both, the magnitude and the speed of price deterioration and apply it to a unique dataset, that includes realized returns and sector positions of CTAs on a daily basis. We find CTAs do acquire positive gains in most sectors during crises, which originate from two sources: Firstly, their diversification across multiple futures markets, i.e. positive yields in gaining markets can counterbalance low performance in the crisis market. Secondly, the fast reduction in CTAs' exposure to crisis markets (in less than 15 days for composite indices) allows them to stabilize their performance. Both factors together, quickly cutting losses in crisis sectors while staying profitable in the other ones, allow CTAs to generate crisis alpha.}},
  articleno    = {{102045}},
  author       = {{Asif, Raheel and Frömmel, Michael and Mende, Alexander}},
  issn         = {{1057-5219}},
  journal      = {{INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS}},
  keywords     = {{Market timing,Commodity trading advisors,Crisis alpha,Managed futures,HEDGE FUND PERFORMANCE,DURATION DEPENDENCE,RISKS,TRATEGIES,RETURNS,STOCK,TIME,GOLD,BULL}},
  language     = {{eng}},
  pages        = {{21}},
  title        = {{The crisis alpha of managed futures : myth or reality?}},
  url          = {{http://doi.org/10.1016/j.irfa.2022.102045}},
  volume       = {{80}},
  year         = {{2022}},
}
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