Quantitative hedge funds achieved double-digit returns in 2026, driven by strong performance across asset classes including commodities and foreign exchange.
The energy sector was the core driver of profits: due to persistent global supply concerns, numerous funds profited from long positions in crude oil, gasoline, and diesel contracts.
However, the momentum for oil price increases has slowed, hampered by uncertain prospects for US-Iran peace talks, leading some trend-following funds to reduce their crude oil holdings.
The surge and intense volatility in oil prices have delivered windfall profits to a niche sector that rarely makes financial headlines: quantitative trend-following hedge funds, also known as Commodity Trading Advisors (CTAs) or managed futures funds.
These trend-following managers utilize machine learning algorithms, mathematical statistics, and factor modeling to capture price trends across the entire spectrum of futures markets, including stocks, bonds, commodities, and foreign exchange.
Conflict in the Middle East has driven up commodity prices, creating an exceptional trading environment for CTAs not seen in years. CTAs rely on systematic, programmatic decision-making based on data signals rather than human emotion, allowing them to take both long and short positions. During periods of severe market turmoil, their returns often exhibit low correlation with traditional assets, providing "Crisis Alpha"—excess returns during crises—to investment portfolios.
Two key industry benchmarks from Société Générale have shown impressive performance: the SG CTA Index, which measures the overall performance of the CTA industry, had gained over 12.2% year-to-date as of June 3rd. The SG Trend Index, tracking the daily performance of ten leading trend-following hedge funds, rose 12.3% over the same period.
Since the outbreak of conflict in the Middle East on February 28th, energy commodities have become the primary force propelling CTA returns.
Nevertheless, with the unpredictable course of the geopolitical conflict and rising uncertainty surrounding US-Iran peace negotiations, major CTA strategies have begun scaling back their long crude oil positions.
Helen Doody, Head of US Operations at Aby Capital, stated that most funds established long positions in energy early on when oil prices began their upward move at the start of the first quarter.
"The geopolitical events in Iran from late February to early March triggered a significant spike in oil prices, and funds capitalized on this sharp rise; CTA strategies also captured the uptrend in distillate contracts like gasoline and diesel," Doody revealed via email.
Nicolas Gausserand, CEO and Chief Investment Officer of Metori Capital, a Paris-based CTA firm active in commodities and financial derivatives, reported that approximately one-third of the firm's performance gains this year stemmed from energy trading.
Could CTAs be heading for another banner year?
The current profit run evokes memories of 2022: that year, the full-scale conflict in Ukraine ignited a surge in oil and commodities, leading trend-following hedge funds to their best annual performance on record, with the SG CTA Index rising over 20%. Fund managers simultaneously captured bearish trends in persistently declining stock and bond markets.
The industry is now debating whether the CTA sector can replicate the bumper harvest of 2022.
Razvan Remsing, Chief Product Strategist at Aspect Capital, commented that the impact of the current energy crunch is deeper and more widespread than previous energy crises during periods of higher globalization.
"The potential for disruption to global energy supply is greater now; although a long-term energy shortage has become highly probable, risk assets overall have strengthened, driven by optimism in the AI sector, which has kept volatility suppressed," Remsing added.
Kung Yong Xin, Head and Chief Investment Officer at Master Investment, noted, "In terms of the scale of profits, the gains contributed by long energy positions this year are comparable to the levels seen in March 2022.
It's noteworthy that CTAs were overall in a loss position on energy in February 2026; all profits this year have come from the rally after March. The profits from this round are about 2.5 times the losses incurred before March, and the profit scale is essentially on par with CTA energy profits in the first quarter of 2022."
Investment Focus Broadens Beyond Crude Oil
Tom Wrobel, Director of Commodity Capital Advisory and Clearing at Société Générale, pointed out that oil profits are just one component of the broad-based CTA bull run in 2026, with macro-driven trends across multiple markets collectively boosting fund performance.
"Profits are coming from multiple sources; it's not a single market or a single trend driving returns."
Kung Yong Xin explained that CTAs first positioned for the rise in precious metals like gold and silver early in the year, then shifted to industrial metals: AI infrastructure investment demand combined with supply tightening caused by the conflict in Iran continues to support industrial metal prices.
Remsing highlighted that as the de-dollarization trend temporarily receded and the euro weakened due to geopolitical conflict, commodity currencies like the Norwegian Krone, Australian Dollar, and Brazilian Real exhibited clear upward trends.
"After the Gulf conflict, energy, especially oil, did contribute to profits, but our gains were not concentrated solely in the energy sector."
Now, with peace talks progressing in fits and starts and oil price momentum slowing, quantitative models are gradually reducing energy exposure.
Doody stated that due to increased and more erratic oil price volatility, long energy positions across the market have generally declined. CTAs currently maintain a net long position in energy, but the size of these holdings is far below the year's peak.
The difficulty of operations in fixed income markets has increased: inflation concerns have pushed up global bond yields, leading CTAs to be positioned short on bonds overall. Short positions are spread across various government bond futures, with US Treasury futures being the largest short, and European, Australian, and Japanese bond futures also widely shorted.
Wrobel indicated that fund managers are closely monitoring their positions: "Managers are unwilling to suffer large losses from a market reversal, so most CTAs are gradually reducing their positions."
This aligns with the standard CTA playbook: hold positions when a trend is present, and actively manage risk as the trend weakens. After volatility increases, profit targets can be achieved without maintaining heavy positions.
A Citigroup analyst report on Tuesday noted that the implied volatility for gold, copper, and soybean oil currently shows a significant premium relative to their realized spot volatility. However, the volatility premium for the entire crude oil and petrochemicals complex is negative.
Gausserand admitted that the most unfavorable market condition for CTAs is when the entire market shifts into a mean-reversion pattern (rapid price reversals), a dynamic seen last year after former President Trump announced his "Liberation Day" tariff policy.
"If there's only a temporary sharp decline in the energy sector, it would only cause losses on the energy side. Stocks or other commodities might actually see profits, so it wouldn't necessarily drag down the fund's overall performance."
Comments