Key Takeaways
- • Gresham Alternative Commodities' ACAR strategy won The Hedge Fund Journal's 2021 CTA Award for Best Performing Strategy over 3 years ending December 2020 in the Trend Follower – Alternative Markets category, with performance data verified by Preqin.
- • ACAR generated significant returns in 2020 through both short exposures (Q1) and long exposures (Q4), with notable contributors including iron ore, metallurgical coal driven by Chinese steel demand, and regional US electricity contracts; performance accelerated in H1 2021 as European and Asian natural gas and thermal coal reached record levels.
- • Gresham targets a long-run Sharpe ratio of approximately 1.0, substantially outperforming traditional liquid trend-following CTAs which typically aim for Sharpe ratios between 0.2–0.5, with comparable indices like the SG Trend Index averaging around 0.2.
- • The ACAR strategy systematically applies modern trend-following technology to markets with fundamental supply and demand drivers, particularly those with inelastic supply and demand characteristics that can generate more extreme trends.
- • The strategy provides diversification benefits across hedge funds, traditional CTAs, commodity indices, and conventional asset classes including bonds and equities.
Summary
Gresham Alternative Commodities' ACAR (Alternative Commodity Absolute Return) strategy earned recognition as a top-performing managed futures vehicle, winning The Hedge Fund Journal's 2021 CTA Award for Best Performing Strategy over the three-year period ending December 2020 in the Trend Follower – Alternative Markets category. The award, powered by performance data from Preqin, highlights the strategy's differentiated approach to commodities-based trend following in an increasingly competitive alternative investment landscape.
The strategy's 2020 performance was driven by tactical positioning across multiple market regimes. Short exposures dominated the first quarter, generating the majority of returns, while the second quarter experienced negative performance as the models transitioned from short to long positioning. The fourth quarter rebounded sharply with strong long exposure performance. Key performance drivers in the second half of 2020 included iron ore and metallurgical coal, both benefiting from elevated Chinese demand for steel production, as well as selected Chinese commodities and regional US electricity contracts. Momentum accelerated substantially in the first half of 2021, as European and Asian natural gas and thermal coal prices surged to record levels, piercing through bank and broker price targets.
Gresham's investment framework targets markets characterized by fundamental supply and demand dynamics, with particular emphasis on inelastic supply and demand characteristics that can catalyze more pronounced price trends. This selectivity distinguishes ACAR from broader commodity indices and more generalized CTA approaches.
The strategy's risk-adjusted performance objectives are ambitious relative to industry benchmarks. Gresham targets a long-run Sharpe ratio in the region of 1.0, substantially exceeding the 0.2–0.5 range typically sought by managers of liquid, directional trend-following strategies. Comparable indices such as the SG Trend Index have delivered standalone Sharpe ratios around 0.2 in recent years. Beyond standalone performance, ACAR is positioned to provide portfolio diversification benefits relative to traditional CTAs, hedge funds broadly, commodity indices, and conventional asset classes including bonds and equities.
The strategy's 2020 performance was driven by tactical positioning across multiple market regimes. Short exposures dominated the first quarter, generating the majority of returns, while the second quarter experienced negative performance as the models transitioned from short to long positioning. The fourth quarter rebounded sharply with strong long exposure performance. Key performance drivers in the second half of 2020 included iron ore and metallurgical coal, both benefiting from elevated Chinese demand for steel production, as well as selected Chinese commodities and regional US electricity contracts. Momentum accelerated substantially in the first half of 2021, as European and Asian natural gas and thermal coal prices surged to record levels, piercing through bank and broker price targets.
Gresham's investment framework targets markets characterized by fundamental supply and demand dynamics, with particular emphasis on inelastic supply and demand characteristics that can catalyze more pronounced price trends. This selectivity distinguishes ACAR from broader commodity indices and more generalized CTA approaches.
The strategy's risk-adjusted performance objectives are ambitious relative to industry benchmarks. Gresham targets a long-run Sharpe ratio in the region of 1.0, substantially exceeding the 0.2–0.5 range typically sought by managers of liquid, directional trend-following strategies. Comparable indices such as the SG Trend Index have delivered standalone Sharpe ratios around 0.2 in recent years. Beyond standalone performance, ACAR is positioned to provide portfolio diversification benefits relative to traditional CTAs, hedge funds broadly, commodity indices, and conventional asset classes including bonds and equities.
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.