FRM’s Managed Futures fund, FRM Sigma, returned approximately 18% in 2010, maintaining its position as one of the industry’s top-performing CTA funds. Sigma’s performance was generated through a dynamic approach that uses managed accounts to invest in a concentrated number of CTA managers and actively vary trade exposures. The results of this approach have been the higher returns and volatility of a top-performing single CTA manager, but through a multi-manager structure that limits single manager risks.
Sigma’s performance in 2010, particularly in the first part of the year, was driven by fixed income and currency trading. In the latter part of the year, exposure to equities and other risk assets drove performance. Sigma will frequently change exposures in order to take advantage of new trends and exit trends coming to a conclusion.
Managed Futures hedge funds (also known as CTAs, trend-followers or systematic traders), utilise rules-based trading programs designed to profit from directional trends in asset classes including equities, fixed income, currencies and commodities. In addition to producing compelling long-term returns, Managed Futures funds can have strong diversification benefits, since their returns are typically uncorrelated to traditional asset classes and other hedge fund sectors. As a result, when added to investor portfolios, Managed Futures tend to reduce a portfolio’s overall volatility and improve its performance characteristics.
Financial Risk Management (FRM) is a global hedge fund investment specialist managing over USD9 billion in fund of hedge funds portfolios for institutional and other sophisticated investors. As well as FRM Sigma, an award-winning Managed Futures fund, FRM manages portfolios investing across the hedge fund spectrum and in certain specialised areas including equities, credit and emerging manager seeding.
