Current market environment performance of dynamic, risk-managed investment solutions.
By Will Hubbard
As we begin the fourth quarter, it’s a good time to take a fresh look at what’s happening in the world of commodity trading advisors (CTAs)—systematic strategies that use futures contracts and other derivatives to identify and capture trends across global markets.
Originally developed in the commodity markets to help producers hedge price risks, CTAs today trade a wide range of assets, including equities, bonds, currencies, and commodities. Because they often move independently of traditional stock and bond markets, they can be valuable tools for portfolio diversification.
Earlier this year, I suggested that 2025 could be the “Year of the CTA.” At that time, there were many unknowns in the market, and adding uncorrelated strategies represented an opportunity to improve portfolio resilience in a downturn.
Despite that early optimism, CTAs as a group have underperformed expectations. The SocGen CTA Index, a key benchmark for CTA performance, is down about 2.65% for the year.
But that number doesn’t tell the whole story.
Not all CTAs are the same
Saying all CTAs are alike is like saying the tech manufacturer Seagate Technology and the athleisure brand Lululemon are the same just because both are in the S&P 500. Sure, they share an index, but their businesses—and performance drivers—are completely different.
The same holds true in the CTA world. While they fall under one broad category, the ways they allocate risk, structure trades, and interpret signals can differ as dramatically as a pair of leggings from a spinning hard drive. Those differences are what investors should look for when evaluating commodity trading advisors.
A diverse and evolving landscape
CTAs were originally built around the idea of systematic futures trading with a focus on trend following, and that’s still a big part of what they do. But the modern CTA universe has evolved into a collection of strategies as varied as the equity market itself.
Some lean heavily on macro trading models; others use short-term mean reversion; and some trade globally across commodities, interest rates, and currencies. Others focus solely on financial or equity markets. Even their time horizons vary widely—some focus on the short term, while others adopt longer-term, cyclical approaches.
That diversity means two CTAs can post positive returns in the same month for completely different reasons. One might have captured a trend in Treasurys, while another benefited from moves in agriculture or foreign exchange.
This variation is what makes CTAs potentially attractive for diversification—but also why they’re often misunderstood.
Performance isn’t the full picture
When people say “CTAs are doing well,” it’s a mistake to assume they’re all performing alike. One fund could be hitting new highs while another is facing drawdowns, even though both are following disciplined, systematic rules.
Going back to our equity analogy, if Seagate stock is up almost 200% year to date—making it one of the best performers in the S&P 500—it doesn’t mean Lululemon will also be up. This year, Lululemon has been one of the weakest performers in the Index, down about 54%. The same dynamic plays out in the CTA space.
In 2022, many CTAs thrived during downtrends in equities and uptrends in energy prices, while shorter-term mean-reversion models struggled with choppier markets. This year, some CTAs have performed well through early volatility, while others have experienced drawdowns.
The result: a wide range of investor experiences under the same “CTA” umbrella. While the SocGen CTA Index is down roughly 2.65% year to date, some long-established CTA managers are up in the low to mid-teens, while others are down 5% to 10%.
A broader approach to diversification
Putting all CTAs into one basket is an overly simplistic view. What may strengthen a portfolio’s resilience is combining multiple CTAs with different time horizons, trading signals, and market focuses.
When structured thoughtfully, a diversified group of CTAs can provide exposure to uncorrelated return streams—helping balance equity-heavy portfolios and potentially mitigating drawdowns when markets turn.
Flexible Plan Investments (FPI) incorporates specialized mutual funds offering exposure to alternative asset classes into accessible investment solutions (to learn how, read Jerry Wagner’s piece, “FPI brings Eckhardt’s elite trading strategies to your portfolio”). For investors seeking to diversify beyond the traditional 60/40 allocation, CTAs can provide a powerful means of introducing adaptability into a portfolio without compromising core holdings.
The key takeaway: CTAs are not all the same. Their diversity is what gives them potential value as a diversifier. Treating them as a single, uniform asset class risks missing important distinctions—and opportunities.
So while 2025 may not be the “Year of the CTA” in the headlines, I still believe it’s the right year to consider what they bring to portfolio construction. No stock goes up forever, and when mega-cap gains eventually slow, diversified strategies like CTAs can help investors stay positioned for what comes next.
For more on how CTAs work and their role in navigating uncertainty, check out my recent articles: “Opportunities in ‘in-between markets,’” “Will investors make 2025 the year of the CTA?,” and “From sticky notes to CTAs: Finding opportunity in the unexpected.”