Where are the Trends? International Trading and Hedge Funds in Foreign Exchange Markets

Hedge funds are, without doubt, one of the least transparent types of financial assets, and numerous studies have debated the persistence of their performance. Trend-following strategies are mainly used in managed futures funds. However, their performance seems entirely different before and after the 2008 financial crisis. Using daily, before-fee profit/loss and position data provided by the one of the top foreign exchange CTAs worldwide, we find that the profit source of this top-class hedge fund could well be its competitors (including export and import companies and financial institutions) because their trading strategies may not be able to profit-maximizing. We also examine the trading strategies of the hedge fund and provide some insight into why the company uses Over-The-Counter (OTC) commodities in their investmen