Quantitative hedge funds using trend-following strategies are outperforming the stock market in 2024. Societe Generale’s SG CTA Index returned 15.7% in the first nine months of the year, beating the S&P 500’s 11.7% gain over the same period. These computer-based funds correctly anticipated September’s bond sell-off with short positions in U.S. Treasurys, while also profiting from bullish dollar bets and pre-Iran war oil positions. Their ability to capture the two major market themes — AI-driven equity optimism and inflation concerns — has driven their performance. The flexibility to go short in fixed income, bypassing traditional portfolio constraints, proved especially valuable as equities and bonds moved together, hurting conventional 60/40 portfolios.
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