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Is investment in CTAs a crowded trade? Video (EN/DE)

4/11/2017

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​Is investment in CTAs a crowded trade?

​Ist ein CTA Investment ein Crowded Trade?

Recently, an investor asked if investing in CTAs was investing in a crowded trade. We think not!
​
Firstly, according to the Bank of International Settlement, the total notional outstanding in derivatives in 2016 was 444 trillion dollars. CTAs manage approximately 350 billion dollars. Assuming an average leverage of 200% across the CTA and Managed Futures industry, the CTAs hold 700 billion dollars in notional outstanding which is only 0.16% of the total derivatives notional outstanding.
Vor kurzem hat ein Investor gefragt, ob CTAs ein “Crowded Trade“ seien. Wir denken nicht.

​​Zum einen beläuft sich das globale Gesamtvolumen aller ausstehenden Derivate laut der Bank of International Settlement, auf 444 Billionen Dollar. CTAs verwalten etwa 350 Milliarde Dollar. Wenn wir einen durchschnittlichen Hebel von 200% für die CTA und Managed Futures Industrie annehmen, halten CTAs lediglich 0.16% am Gesamtmarkt.
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​Secondly, we are looking at segments and the most crowded markets: The typical CTA allocation holds 35% in bonds and interest rates, 30% in commodities, 20% in currencies, and 15% in equity linked derivatives. According to BIS data, commodities are the smallest derivatives segment with total notional outstanding of 1.35 trillion dollars. Using the same assumptions as above, 15% of total notional outstanding in commodities is being held by CTAs. This matches CFTC data suggesting that about 15% of commodity futures are held by speculators.
 
In respect of the total global derivatives markets and the US Treasury's definition of a crowded trade, we conclude that CTAs have such small and dissimilar positions that they offer little risk in terms of insufficient liquidity, should market participants seek to unwind their positions simultaneously. CTAs are therefore not a crowded trade.
​Zum anderen betrachten wir die einzelnen Marktsegmente: Ein typischer CTA hält 35% in Renten und Zinsen, 30% in Rohstoffen, 20% in Währungen, und 15% in Aktienderivaten. Laut der BIS  Daten bilden die Rohstoffe mit 1.35 Billionen Dollar in ausstehenden Derivaten das kleinste Segment. Unter gleichen Annahmen wie zuvor halten CTAs etwa 15% an diesem Segment. Dies trifft auch mit CFTC Daten überein, wonach ca. 15% der Rohstoffe von Spekulanten gehalten werden.
 
Unter Berücksichtigung der Definition des US Finanzministeriums zu Crowded Trades und aufgrund der Tatsache, dass CTAs zum Einen nur einen verhältnismäßig kleinen Anteil des Gesamtmarktes ausmachen und dieser zum Anderen stark diversifiziert ist, stellen CTAs kein Risiko zur Marktliquidität dar, selbst bei gleichzeitiger Auflösung aller Positionen aller CTAs kommen. Somit sind CTAs kein Crowded Trade.
Sources:
https://definedterm.com/crowded_trade
http://www.bis.org/
http://www.cftc.gov/index.htm
https://www.barclayhedge.com/
http://www.j8capital.com/j8-cta-index.html
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    Dr. Tillmann Sachs, CIO and Head of Research

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  • About
    • Organisation and regulation
    • Awards & News
    • Join as trader or AR
    • Career
  • J8 GARS
    • Glossary - What is....
  • Research
    • J8 CTA Index
    • Videos >
      • Video Series: What are CTAs? EN/DE
    • JII - A liquid and investible benchmark index for the CTA and MF industry
    • THFJ - Common Denominators in CTAs: Traded Markets
    • THFJ - Common Denominators in CTAs: Portfolio Construction and Index
    • JII - Common denominators in the CTA and managed futures industry: A survey report
    • THFJ - Correlation is not always what it seems
    • Quantifying Political Risks - PhD Thesis
  • Contact