Absolute Return strategies enable CTAs to produce returns regardless of market direction, employing a broader toolkit of investment instruments.
CTAs may be commonly associated with “absolute return strategies,” as returns generated can be independent of financial markets. Absolute return strategies enable CTAs to produce returns regardless of market direction. While traditional strategies implement long-only techniques to drive client return, absolute return strategies employ a broader toolkit of investment instruments. These instruments may include short selling, futures, options, derivatives, and use of leverage. It is this versatility of absolute return strategies that drives alpha generation, or risk-adjusted outperformance relative to a benchmark.