Regulation of over the counter markets poses one type of challenge to the CTA community, but there are others to consider too.
"My feeling is that the worst excesses in terms of politics are past us, and a bit more common sense will start to prevail."
Instead, Stenbom stresses the liquid nature of the market and the strengths that has implied in recent years. "CTAs are better equipped than most other players to quickly adjust to changes in the market environment, especially in times of crisis."
This is because, when crisis strikes, it can push trends in certain directions, such as bull trends in treasuries, big movements in currency, and in perceived safe havens such as gold, or bear moves in industrial commodities.
The systematic nature of CTA comes to the fore at such times. If the systems spot gold is starting to move because investors are buying it as a safe haven, they also buy gold. If equities are falling they can short equities via index futures.
"They are in a unique position to exploit the inefficiencies that develop as a result of the panic, or synchronised action of investors," Stenbom says. Behavioural biases also factor into the discussion on the benefits of CTAs, Stenbom says, including herding, loss aversion, long bias and confirmation bias.
This may explain why Stenbom sees growing interest in CTA strategies, helped by investors questioning the ability of equity markets to generate long-term returns.
In the current environment, it certainly plays to the idea that CTAs can offer an element of downside protection. This leaves the lack of trends as a remaining key challenge, says Brument.
One such area is interest rates in developed markets, where central banks have cut their rates to record low levels. Where differences between the rates has minimised, it dents the opportunities to take advantage of price trends, such as changing FX rates. This, in turn, affects the rate of change in commodity prices.
The best situation for a CTA strategy is a steady trend in prices without volatility, Brument says. Increased volatility implies a trend is set to reverse, which means the manager has to decide whether, say, a long position needs to be switched for a short.
Total return swaps
Ucits rules historically have restricted the possibility of putting commodity futures directly into Ucits funds, says Steve Brument.
However, providers have found a workaround solution to such barriers. For example, they rely on the fact Ucits funds can invest in financial indices, using the Ucits definition of a financial index.
Providers have therefore built indices replicating CTA strategies - Dexia built its own systematic index - allowing investors to access total return swaps within a Ucits.
Ucits are important because it is an easier market to penetrate than that for traditional CTAs, where there is a notable concentration of managers.