Key Takeaways
- • A Pensions & Investments commentary argues that commodity trading advisor (CTA) strategies can deliver "crisis alpha," or positive returns during periods of market stress, and that adding CTAs to a traditional 60/40 portfolio can enhance returns in uncertain markets.
- • The research described in the commentary holds that a diversified, six-CTA multi-manager portfolio can capture crisis alpha in a more stable and predictable manner than individual managers.
- • The term "crisis alpha" was coined by Kathryn Kaminski after the 2008 Global Financial Crisis, in response to a question from a large pension investor.
- • Crisis alpha is associated with managed-futures trend-following strategies that seek to profit from persistent price trends during periods of crisis.
Summary
A commentary published in Pensions & Investments makes the case that CTAs, which run systematic futures strategies, offer a "silver lining" for portfolios during turbulent markets. The piece centers on crisis alpha, the positive returns these strategies can generate when markets are under stress. According to the publisher's description of the accompanying research, adding CTAs to a 60/40 portfolio can contribute crisis alpha during uncertain periods.
The research presents a six-CTA portfolio as a means of capturing crisis alpha in a stable and predictable manner. The diversified, multi-manager structure is positioned as the mechanism for delivering that consistency, rather than reliance on a single trading program.
The concept has a documented origin in institutional investing. Kathryn Kaminski coined the term "Crisis Alpha" following the 2008 Global Financial Crisis, in response to a question from a large pension investor. Her subsequent work, including a Pensions & Investments piece, has been cited in related commentary as a reference point for the strategy's rationale.
Critics and practitioners alike note that CTA performance is not guaranteed. Commentary elsewhere in the publisher's research library cautions that the strategy carries risk, partly because behavioral biases can distort perceptions of skill and persistence. Allocators evaluating CTA exposure should weigh those considerations alongside the diversification and crisis-period benefits described in the piece.
The research presents a six-CTA portfolio as a means of capturing crisis alpha in a stable and predictable manner. The diversified, multi-manager structure is positioned as the mechanism for delivering that consistency, rather than reliance on a single trading program.
The concept has a documented origin in institutional investing. Kathryn Kaminski coined the term "Crisis Alpha" following the 2008 Global Financial Crisis, in response to a question from a large pension investor. Her subsequent work, including a Pensions & Investments piece, has been cited in related commentary as a reference point for the strategy's rationale.
Critics and practitioners alike note that CTA performance is not guaranteed. Commentary elsewhere in the publisher's research library cautions that the strategy carries risk, partly because behavioral biases can distort perceptions of skill and persistence. Allocators evaluating CTA exposure should weigh those considerations alongside the diversification and crisis-period benefits described in the piece.
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