Why call them hedge funds? Good question. Why call them commodity trading advisors (CTAs)? Another good question. Consider a quote from Futures Magazine:
“Hedge funds should be renamed, perhaps to ‘anything-but-hedge’ funds.”
Hedge funds do not make money by hedging. They make money by speculating. They take risk and hopefully reward will follow. The term hedge fund confuses the issue.
On the other hand, many trend followers are regulated by the government. The CFTC calls them Commodity Trading Advisors (CTAs). How does this make sense? CTA is a misnomer. It doesn’t come close to accurately describing traders that take positions in stocks, bonds, currencies and energies. Sure, many trend followers trade physical commodities, but many do not.
I would like to see the terms hedge fund and commodity trading advisor disappear. Let’s just call the men and women who trade client capital fund managers. There will be far less confusion!
