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February 21, 2024

Tackle High Inflation and Volatile Markets with Commodity Trading Advisors (CTAs)

Systematic trend-following strategies for every market challenge

CTAs: Under the Hood

Today’s investor faces many challenges. After decades of low inflation and low interest rates that supported relatively steady economic growth, inflation and interest rates have soared as lockdown measures imposed during the COVID-19 pandemic eased, and a massive rebound in economic activity ensued.

Unsurprisingly, markets have been tumultuous of late, as major geopolitical issues are also spooking investors. Correlation among asset classes has increased as well. Traditional equities and fixed income used to perform differently under various economic conditions (i.e., they had low correlation), providing valuable portfolio diversification and enhanced return potential with less overall risk. Now such asset classes are more correlated, with their similar performance characteristics resulting in weaker diversification and greater risk.

What can an investor do under such trying conditions? Consider an investment solution managed by registered professionals known as Commodity Trading Advisors (“CTAs”) that offers convenient access to a well-diversified and inflation-fighting commodities strategy, provides correlation benefits and is designed to thrive when equity markets are in crisis. As regulated money managers, CTAs use stringent rules-based, trend-following strategies on commodity and financial futures that help strip the emotions out of investing.

Institutional investors have long recognized the benefits of CTAs. In fact, sovereign wealth plans and pensions have used CTAs for decades, often making “risk mitigation” and “crisis risk offset” strategies a core portfolio component. CTAs have traditionally comprised a meaningful allocation in sophisticated institutional portfolios.

How to Invest

CI Auspice Alternative Diversified Corporate Class employs a disciplined, multi-strategy investment process to generate returns from its exposure to global commodities. The fund’s active, systematic approach aims to preserve capital as it generates returns uncorrelated to traditional equity, fixed income and most alternative strategies. One of its core goals is to achieve relative outperformance (known as “alpha”) in times of significant equity market corrections (”crisis alpha”).

When the Auspice Diversified Trust launched in 2007, it was exclusive to institutional and select accredited and high-net-worth investors. Now this strategy is available to retail investors as a public “liquid alternative” Mutual Fund and  through CI as a feeder fund to the well established Auspice flagship fund. Whereas many alternative strategies are highly illiquid (i.e., assets must stay invested for longer periods), CI Auspice Alternative Diversified Corporate Class offers daily liquidity so investors have easy access to their money.

The fund is advised by Auspice Capital Advisors, the largest active commodity and CTA fund manager in Canada, founded by a team that has over 25 years of experience in the world of quantitative investing and commodities, with approximately $1B in firm AUM (as at February 1, 2024). 

Here are two key reasons why many institutional investors have been drawn to Auspice Diversified Trust, and why CI Auspice Alternative Diversified Corporate Class should resonate with retail investors:

  1. Crisis alpha. As the following chart illustrates, Auspice Diversified Trust has a proven track record of delivering strong performance in an equity sell-offs. Please note the BTOP50 CTA Benchmark Index seeks to replicate the overall composition of the managed futures industry with regard to trading style and overall market exposure. While the BTOP50 has a 35-year history of generating crisis alpha, Auspice Diversified Trust has a 17-year track record of crisis alpha outperformance, and has also outperformed the BTOP50 CTA benchmark since inception.

    Auspice Diversified Trust, Crisis Alpha Since Inception

    Graph of Auspice Diversified Trust, Crisis Alpha performance since inception
    Sources: Bloomberg Finance L.P. and Auspice Investment Operations, as at August 31, 2023.

  2. Inflation hedge. While high inflation tends to negatively impact traditional equities and fixed income, commodities have generally registered positive returns amid inflation surges and periods of “normal” inflation alike. Among the dynamic strategies, trend-following provides the opportunity for protection during notable inflation shocks. The following chart shows the real total returns of various assets during eight periods of significant U.S. inflation, plus the annualized return during inflationary, non-inflationary and all periods. In the first column, the strategy is denoted as active or passive by “A” or “P,” respectively.
    Specific inflation regimesCombined regimes
     US enters WW2End of WW2Korean WarEnding of Bretton WoodsOPEC oil embargoIranian revolutionReagan's boomChina demand boomInflation (19%)Other (81%)All (100%)
    Start monthApr 1941Mar 1946Aug 1950Feb 1966Jul 1972Feb 1977Feb 1987Sep 2007   
    End monthMay 1942Mar 1947Feb 1951Jan 1970Dec 1974Mar 1980Nov 1990Jul 2008   
    Total price level chg15%21%7%19%24%37%20%6%   
    Length (mths)141374830384611   
    StrategyReal return (total)Real return (ann.)
    (P) Commodities - Energies-3%2%-6%-16%264%57%201%68%41%-1%3%
    (A) Trend – All assets20%23%19%135%196%100%65%17%25%15%16%
    (A) Trend – Commodities  1%54%173%33%132%25%20%8%10%
    (P) Commodities – Industrial   115%38%-6%306%3%19%4%7%
    (A) Trend – Bonds   79%54%149%6%6%15%9%10%
    (P) Commodities – Aggregate 12%6%26%85%38%84%21%14%1%4%
    (P) Commodities – Gold    166%154%-18%27%13%-1%1%
    (P) Commodities – Precious   28%29%185%-27%33%11%-2%1%
    (A) Trend – Equity20%23%24%77%23%-13%13%-3%8%11%10%
    (P) Commodities – Softs   -41%243%15%11%15%8%-3%-1%
    (A) Equity Factor – Cross-sectional Mom.-15%-18%7%35%38%44%41%26%8%4%5%
    (P) Commodities – Agri 12%6%-23%197%-21%6%33%7%-3%0%
    (A) Trend – FX    -14%16%42%6%4%4%4%
    (A) Equity Factor – Quality (QMJ)   14%-1%-12%40%7%3%3%3%
    (P) Fixed Income – TIPS   -3%13%-2%11%6%2%3%3%
    (A) Equity Factor – Investment (CMA)   -7%31%-9%24%-10%2%2%2%
    (P) Long Equities – Energy Sector-14%-10%25%-19%-19%31%31%2%1%8%6%
    (A) Equity Factor – Profitability (RMW)   4%-24%-8%18%6%-1%2%2%
    (A) Equity Factor – Value (HML)-4%-17%3%-8%36%-11%-3%-7%-1%2%2%
    (P) Real Estate – Residential-17%4%-4%-2%-7%11%0%-13%-2%2%1%
    (A) Equity Factor – Low Vol (BAB)-24%-6%-3%28%-13%9%-7%-22%-3%8%6%
    (P) Fixed Income – 2 Yr. Treasury-13%-17%-6%-1%-7%-17%11%0%-3%2%1%
    (A) Equity Factor – Size (SMB)-11%-23%-4%45%-43%32%-26%-4%-4%1%0%
    (P) Fixed Income – 10 Yr. Treasury-11%-17%-6%-13%-12%-31%8%5%-5%4%2%
    (P) Fixed Income – High Yield-4%-11%0%-18%-21%-38%-10%-8%-7%6%4%
    (P) Long Equities – Market Composite-24%-27%24%-7%-46%-14%12%-17%-7%10%7%
    (P) Fixed Income – Investment Grade-7%-12%-3%-23%-20%-43%-5%1%-7%6%3%
    (P) Fixed Income – 30 Yr. Treasury-17%-17%-6%-20%-28%-41%13%2%-8%5%3%
    (P) Long Equities – Consumer Durables-16%-32%24%-30%-62%-27%-28%-36%-15%13%7%
    Source: The Best Strategies for Inflationary Times, May 25, 2021. Returns for energies and gold in grey italics are spot returns where futures data was not available, and are not included in the combined regime calculation. The data will vary by start date.

Key attributes coveted by investors

Given the positive aspects of Auspice Diversified Trust, it becomes clear why CI Auspice Alternative Diversified Corporate Class is worth considering by retail investors seeking a robust solution to today’s pressing issues of equity volatility and inflationary pressures. The strategy has historically benefited from:

  • A higher allocation to the burgeoning commodities market relative to its peers
  • Negative correlation to equities; no correlation to fixed income and most other alternatives
  • A portfolio management team with demonstrated experience trading in volatile environments
  • A history of consistent outperformance (alpha) during equity market corrections
  • A history of strong performance in periods marked by high inflation and volatility
  • An additional return earned on the cash position (typically over 90% of the fund) given the nature of futures-based strategies

Is your portfolio constructed to offset the potentially damaging effects of volatile equities and high inflation? Protecting and building your wealth empowers you to approach the future with greater confidence. If CI Auspice Alternative Diversified Corporate Class sounds like the type of CTA managed investment strategy that can help you withstand the current environment, please visit the fund page to learn more.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. Returns of the Index do not represent the fund’s returns. An investor cannot invest directly in the Index. Performance of the mutual fund is expected to be lower than the performance of the Index.

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication.  Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.

This mutual fund is an alternative fund. It has the ability to invest in asset classes or use investment strategies that are not permitted for conventional mutual funds. The specific strategies that differentiate this fund from conventional mutual funds include increased use of derivatives for hedging and non-hedging purposes; increased ability to sell securities short; and the ability to borrow cash to use for investment purposes. While these strategies will be used in accordance with the fund’s investment objectives and strategies, during certain market conditions they may accelerate the pace at which your investment decreases in value.

Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.

Auspice Capital Advisors Ltd. are portfolio subadvisors to certain funds offered and managed by CI Global Asset Management.