# Market turmoil a boon for trend-following hedge funds Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-10-17 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Trend-following Hedge Funds Profiting Amid Market Disruption Meta Description: Discover how hedge funds like Graham Capital Management and AQR Capital Management are thriving in volatile markets, making gains of over 40% this year. URL: https://financedigest.com/market-turmoil-a-boon-for-trend-following-hedge-fundshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-10-17t111823z2lynxmpei9g0fgrtroptp4usa-trump-stocks-1736815009639-compressed.jpg) By Nell Mackenzie (Reuters) – Trend-following hedge funds are capitalising on market disruption and geopolitical unrest, with funds such as Graham Capital Management, Aspect Capital, AlphaSimplex and AQR Capital Management all near or over 40% higher for the year. Such funds profit by buying or selling when the markets make big moves and by riding that move until it fizzles out or the market changes direction. They have thrived in [markets whipped around by soaring inflation](https://www.financedigest.com/hungarys-booming-wedding-market-doused-by-soaring-inflation.html "Hungary’s booming wedding market doused by soaring inflation"), high interest rates and the energy shock. [Stock market](https://www.financedigest.com/compelling-tips-to-make-profitable-investments-in-the-stock-market.html "Compelling Tips to Make Profitable Investments in the Stock Market") volatility as measured by the CBOE Volatility Index – known as Wall Street’s fear gauge – has risen sharply since August and an ICE BofA index tracking U.S. Treasury volatility is at its [highest since March](https://www.financedigest.com/russian-inflation-accelerates-to-7-61-m-m-in-march-highest-since-1999.html "Russian inflation accelerates to 7.61% m/m in March, highest since 1999") 2020. Trend strategies work best when volatility levels are high, says Yao Hua Ooi, principal and co-head of macro strategies at the $143 billion [hedge fund](https://www.financedigest.com/what-is-a-hedge-fund.html "What Is A Hedge Fund") AQR, which has one trend fund set for its best year so far, up 70%, according to a source with knowledge of the matter. This is the type of environment where trend-following strategies historically have tended to thrive and provide valuable diversification benefits,” said Ooi, referring to how large [investors sometimes use hedge funds](https://www.financedigest.com/uk-investors-add-1-2-billion-to-equity-funds-in-march-calastone.html "UK investors add .2 billion to equity funds in March – Calastone") in a portfolio as an alternative source of revenue to traditional investments. AQR is part of an index of the 10 largest trend-following [hedge funds](https://www.financedigest.com/hedge-funds-set-to-end-2021-with-inflows-for-first-time-in-three-years.html "Hedge funds set to end 2021 with inflows for first time in three years"), compiled by Société Générale. The index has risen almost 37% this year, compared with a 3.8% increase in [data provider HFR’s broader index of hedge fund](https://www.financedigest.com/hedge-funds-suffer-big-outflows-in-q2-data.html "Hedge funds suffer big outflows in Q2 – data") performance. BarclayHedge estimates that trend followers are $297 billion of the $4.9 trillion hedge [fund industry](https://www.financedigest.com/how-solvency-ii-transformed-itself-the-fund-industry-and-regulation.html "How Solvency II transformed itself, the fund industry and regulation"). Other funds in the index also [posted double-digit returns](https://www.financedigest.com/uber-could-post-first-adjusted-profit-this-quarter-as-ride-demand-returns.html "Uber could post first adjusted profit this quarter as ride demand returns"). Graham Capital Management’s least leveraged [share class in its Tactical Trend Fund](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister") was up 40% this year as of Oct. 11, Aspect [Capital’s Diversified fund](https://www.financedigest.com/galois-capital-flagship-fund-to-close-after-ftx-losses.html "Galois Capital flagship fund to close after FTX losses") is up 43.7% as of the end of September, and Winton’s trend-following strategy was up 24.5% so far this year, said people with knowledge of the matter. Hedge funds Man Group, AlphaSimplex and [Transtrend have reported trend strategies](https://www.financedigest.com/u-s-lighting-products-market-recent-strategies-trends-technology-innovation-analysis-application-by-tmr.html "U.S. Lighting Products Market: Recent Strategies, Trends, Technology Innovation, Analysis Application by TMR") with performances this year of roughly 15%, 48% and 31% respectively. GRAPHIC – Trend following [hedge fund](https://www.financedigest.com/when-activist-hedge-funds-come-knocking-answer-with-zero-based-budgeting.html "When activist hedge funds come knocking, answer with zero-based budgeting") performance in 2022 https://graphics.reuters.com/HEDGE-FUND/gkvlgrowapb/chart.png ![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/10/329.jpg) We do best when things change and particularly in ways that people don’t like,” said Kathryn Kaminski, chief research strategist at AlphaSimplex [Group which manages 7.8 billion](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility") pounds ($8.8 billion) of assets. In those environments it [works well](https://www.financedigest.com/biden-says-he-is-doing-well-working-after-testing-positive-for-covid.html "Biden says he is ‘doing well,’ working after testing positive for COVID") to follow the markets as opposed to asking what markets should or should not be doing. Funds in the Société Générale CTA index include AQR Capital Management, AlphaSimplex Group, Aspect Capital, Systematica Investments, Graham Capital Management, ISAM LLP, Lynx [Asset Management](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation"), Man Group’s AHL fund, Transtrend and Winton Capital Management. NEW ERA We have seen all of these disruptors emerge,” said Razvan Remsing, director of [investment solutions at Aspect Capital](https://www.financedigest.com/italys-brembo-sets-up-venture-capital-arm-to-invest-in-tech-startups.html "Italy’s Brembo sets up venture capital arm to invest in tech startups"). Juxtaposing the war in Ukraine, the [energy shortage in Europe](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out") and even the change in people’s behaviour post-pandemic with the growing reality that central banks can no longer be relied on to mitigate volatility and clearly there is a “highly uncertain and divergent macro environment,” he says. To us this actually [means more opportunity,”](https://www.financedigest.com/could-brexit-mean-new-opportunities-abroad.html "Could Brexit mean new opportunities abroad?") Remsing added. Simultaneous declines in [stock and bond](https://www.financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-ease.html "Stocks, bonds extend rally on hopes rate hikes ease") portfolios, a surge in volatility and unexpected market pricing have made a perfect storm for trend followers, says Robert Khoury, an independent hedge fund analyst. “They’ve been hitting it on all cylinders,” said Khoury. The ultimate [aid for trend](https://www.financedigest.com/infant-positioning-aids-market-application-trends-growth-opportunities-and-worldwide-forecast-to-2027.html "Infant Positioning Aids Market Application, Trends, Growth, Opportunities and Worldwide Forecast to 2027") followers has been inflation, said Michael Harris, president of the $2.6 billion Quest Partners, which is up 34.7% for the year, according to a person with knowledge of the matter. Cheap [money in the system and geopolitical risk has meant supply issues](https://www.financedigest.com/more-than-one-in-ten-brits-are-embarrassed-to-talk-to-anyone-about-their-money-issues.html "More than one in ten Brits are embarrassed to talk to anyone about their money issues") and therefore inflation. The [world faces](https://www.financedigest.com/fund-nature-protection-now-or-face-huge-losses-says-world-bank.html "Fund nature protection now or face huge losses, says World Bank") a new regime of monetary tightening and volatility, he said. [Man Group](https://www.financedigest.com/man-group-picks-all-female-top-team-as-ceo-ellis-retires.html "Man Group picks all-female top team as CEO Ellis retires") and Systematica Investments declined to comment. ($1 = 0.8863 pounds) (Reporting by Nell Mackenzie; Editing by Hugh Lawson) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---