Key Takeaways
- • CFM ISTrends Equity Capped (ISTEC) delivered 24.4% net performance in 2022, earning The Hedge Fund Journal's CTA performance award for best risk-adjusted returns in the equity-capped trend follower category for the second time (also won in 2021 for 2020 performance).
- • Interest rate positions (both short- and long-term) generated the largest performance contribution in 2022, followed by commodities and currencies, while equity indices detracted slightly from returns—a structural advantage given 2022's volatile equity market conditions.
- • ISTEC's zero forecast beta equity cap proved defensive in 2022 by limiting long equity exposure during a year when equity indices declined and countertrend rallies "whipsawed" uncapped trend followers; this distinguishes it from CFM's sister program ISTrends, which carries fluctuating equity beta exposure.
- • Since inception in April 2019, ISTEC has established itself as an absolute return strategy designed to deliver positive uncorrelated returns and downside equity protection through proprietary trend-following models developed over 30+ years of CFM's experience.
- • The strategy's structural positioning creates potential vulnerability exposure for traditional CTAs currently holding elevated US equity beta following the 2023 bull run, while ISTEC's capped framework mitigates this tail risk.
Summary
CFM ISTrends Equity Capped (ISTEC) has reinforced its standing as a top-performing equity-capped trend follower, securing The Hedge Fund Journal's CTA performance award for best risk-adjusted returns in its category for calendar year 2022—the second such honor, having previously won in 2021 for 2020 performance. The strategy delivered 24.4% net performance in 2022, representing its strongest year since inception in April 2019. The awards, powered by Preqin data, underscore ISTEC's consistent ability to generate positive risk-adjusted returns in volatile market environments.
Performance attribution in 2022 reveals a well-diversified multi-asset exposure across five primary asset classes. Short-term and long-term interest rate positions contributed most significantly to returns, followed by commodities and currencies. Notably, equity indices slightly detracted from performance—a factor that proved structurally advantageous given 2022's challenging market dynamics. The year's price action included numerous countertrend rallies that "whipsawed" many traditional trend followers, according to Philip Seager, Head of Portfolio Management and portfolio manager of ISTEC at CFM. This contrasts sharply with 2020, when all five asset classes contributed positively to returns.
The defining characteristic differentiating ISTEC from competing trend-following strategies is its overarching equity beta cap mechanism, applied at zero forecast beta. This structural constraint limits long equity exposures regardless of market conditions, including during bull runs. Following the 2023 equity bull run, many uncapped CTAs likely accumulated significant long exposure to US equities, positioning them vulnerably to potential market reversals. CFM's sister program, ISTrends, operates without an equity beta cap and maintains a fluctuating equity beta that can reach elevated levels during bull markets, creating materially different risk profiles between the two offerings.
ISTEC operates as an absolute return strategy grounded in trend-following methodology and powered by CFM's proprietary trend models refined across more than three decades of experience. The strategy's design emphasizes downside equity protection and return uncorrelation from traditional benchmarks—attributes that resonate with institutional investors and hedge fund managers seeking diversification beyond traditional long-only allocations. The consistent award recognition and documented performance track record position ISTEC as a meaningful alternative allocation for portfolios seeking managed futures exposure with defined risk parameters.
Performance attribution in 2022 reveals a well-diversified multi-asset exposure across five primary asset classes. Short-term and long-term interest rate positions contributed most significantly to returns, followed by commodities and currencies. Notably, equity indices slightly detracted from performance—a factor that proved structurally advantageous given 2022's challenging market dynamics. The year's price action included numerous countertrend rallies that "whipsawed" many traditional trend followers, according to Philip Seager, Head of Portfolio Management and portfolio manager of ISTEC at CFM. This contrasts sharply with 2020, when all five asset classes contributed positively to returns.
The defining characteristic differentiating ISTEC from competing trend-following strategies is its overarching equity beta cap mechanism, applied at zero forecast beta. This structural constraint limits long equity exposures regardless of market conditions, including during bull runs. Following the 2023 equity bull run, many uncapped CTAs likely accumulated significant long exposure to US equities, positioning them vulnerably to potential market reversals. CFM's sister program, ISTrends, operates without an equity beta cap and maintains a fluctuating equity beta that can reach elevated levels during bull markets, creating materially different risk profiles between the two offerings.
ISTEC operates as an absolute return strategy grounded in trend-following methodology and powered by CFM's proprietary trend models refined across more than three decades of experience. The strategy's design emphasizes downside equity protection and return uncorrelation from traditional benchmarks—attributes that resonate with institutional investors and hedge fund managers seeking diversification beyond traditional long-only allocations. The consistent award recognition and documented performance track record position ISTEC as a meaningful alternative allocation for portfolios seeking managed futures exposure with defined risk parameters.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.