CTA Trend Following: This Time Is Different?
This paper asks whether recent difficulty for CTA trend following reflects a lasting change in markets. It documents that trends have shifted direction more frequently since 2010, and more still in the mid-2010s, which makes simple trend approaches harder to run profitably. The analysis argues that using faster signals alone does not solve the problem, because short trends have also been weak. Instead, it points to three features that help a trend strategy adapt: a broad set of signals, dynamic allocation of risk toward assets and asset classes with stronger trends, and efficient execution. Using return attribution, it shows how a disciplined process directs risk toward stronger, more stable trends. The paper also considers why manager selection matters, since the dispersion of trend-following returns has been wide. It is written for allocators evaluating managed futures and CTA exposure, and it frames its conclusions as analytical perspective.
What This Paper Examines
- Whether the recent trend-following environment marks a lasting change.
- How often trends have shifted direction over time, and why that matters.
- Whether faster trend signals are a sufficient response.
- How dynamic risk allocation directs risk toward stronger trends.
- Why manager selection matters when trend returns are widely dispersed.
Key Findings
- Trends have been shifting direction more often. The average number of trend reversals per year rose after 2010, which shortens the trends that CTAs rely on and pressures simple approaches.
- Faster signals alone are not the answer. Short-term trends have also been weak, so simply trading quicker tends to raise costs without restoring returns.
- Dynamic risk allocation adds value. Directing risk toward assets, asset classes, and horizons with stronger, more stable trends has tended to improve outcomes in a harder environment.
- Risk management is central, not incidental. Sizing positions by the strength and stability of trends helps a portfolio adapt as conditions change.
- Manager selection matters more than the label. Wide dispersion in trend-following returns shows the category is not generic, so choosing an adaptable manager is important.
The Authors
Deepak Gurnani, Founder and Chief Investment Officer
Deepak Gurnani is the Founder and Chief Investment Officer of Versor Investments. Deepak has three decades of experience in applying quantitative methods to uncover alpha across global equity markets. Over the past decade, he has focused on pioneering the use of AI and alternative data in equity investing.
Ludger Hentschel, Founding Partner, Investment Advisor
Ludger Hentschel joined Versor Investments as a Founding Partner and is based in New York. Ludger has over 20 years of experience in quantitative research and investing.
Disclaimer: Past performance is not necessarily indicative of future results. Not an offer to sell or a solicitation of any type with respect to any securities or financial products.
Methodology: The analysis uses simulated and live trend-following returns across more than sixty liquid futures contracts in commodities, equities, fixed income, and currencies, with signal comparison periods spanning roughly one month to one year. Trend reversals are counted for a constant blend of short-, medium-, and long-term signals from 1990 onward. Return attribution decomposes performance by contract, asset class, and signal horizon, and compares it to CTA hedge fund benchmarks such as the SG Trend and HFRX Systematic Diversified CTA indices. The focus is on the relationship between trend strength and return contribution, not on any single realized outcome.
Request Access
Disclosures
Each report prepared by Versor Investments LP (formerly “ARP Investments” herein after referred to as “Versor Investments”) and available on this site is for informational and educational purposes only, is not intended to be relied on as a forecast, research or investment advice, and does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Reliance on information in this material is at the sole risk and discretion of the reader.
No information set forth on this site constitutes a prospectus, private placement memorandum or offering circular or otherwise constitutes an offer to sell, or solicitation of any offer to buy, any securities or other investments. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. From time to time, Versor Investments may, along with Versor Investments’ clients and/or investors, hold direct or indirect positions or have exposure to securities, asset classes and financial markets referred to in a report on this site.
Offering materials relating to investments in entities managed by Versor Investments are not available to the general public. Investment funds managed by Versor Investments are available for subscription only on the basis of the relevant prospectus or confidential private placement memorandum, which is available only to investors satisfying the applicable eligibility criteria for investment.
The information set forth on this site is not intended to provide or to constitute investment, accounting, legal or tax advice. Versor Investments’ reports do not contain information that an investor should consider, evaluate or rely on with respect to the nature, potential, value or suitability of any particular sector, geographic region, security, portfolio of securities, commodity, portfolio of commodities, currency or portfolio of currencies, transaction, investment strategy or other matter. No report set forth on this site was prepared in reference to the specific investment needs, objectives or risk tolerances of any investor or client. The views expressed in a report reflect significant assumptions and subjective judgments of Versor Investments as of the date of the report, are subject to change without prior notification and may not be updated.
Certain information has been provided by third-party sources, and while Versor Investments believes that information to be reliable, Versor Investments has not independently verified such information. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Versor Investments, its officers, employees or agents.
This site may contain “forward looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass.
The information is not intended to be, nor shall it be construed as, investment advice or a recommendation of any kind. Before making any investment, prospective investors should consult their investment professionals, carefully review the risk factors and other terms disclosed in the relevant offering materials and related information and rely solely on such offering materials and related information in making any investment decision.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. COMMODITY INTEREST TRADING INVOLVES SUBSTANTIAL RISK OF LOSS.