Sovereign debt may trigger CTA opportunity, says PJM

Peter Matthews runs $250 million in managed futures assets for Virginia, USA-based PJM Capital. Last week he was travelling around Asia talking to potential new investors, hosted by PMJ's third-party distributor, Signature Advisors.

Following a bonanza year in 2008 when the strategy was up 18%, 2009 proved to be something of a damp squib for managed futures strategies and on average funds were up just 2%, according to Eurekahedge.

"We were down 5% in 2009, which is the first annual calendar loss in the history of our system," says Matthews. "However we were up 28% in 2008, and I don't think there are many strategies in which you would be unhappy with a 23% positive return for 2008/2009."

Peter Matthews cut his teeth in managed futures in the Man Group in the 1990s. He then moved to Caxton Associates before striking out on his own in 2007 and starting PJM Capital. (That name stands for Peter and Jackie Matthews). The system he uses today is an evolved version of the one that he personally invented back in those earlier days.

2009 was not propitious for CTA and managed futures funds because the recovery came out of volatility and, as a rule, these funds cut positions when volatility is high. True, equities did show a trend in 2009, an upward one, but beyond stocks, bonds were sideways, commodities were up and down and currencies moved in waves.

"Now, volatility is down and markets are trading sideways, so there has been a chance to build positions," says Matthews. "As an emerging trend, possibly the area for biggest opportunities is government bonds, because those bonds were propped up by government stimulus packages and money printing. When that is finally removed, interest rates have to rise and then a strong trend downwards for government bonds may emerge. When that starts to happen then the CTAs and managed futures funds will be on board and already positioned."