Chasing the latest market fad isn't all bad.

Some investment funds that jump on trends are outperforming traders who pride themselves on outthinking the market. Increased volatility in markets from commodities to stocks is helping the trend followers profit.

A particular category of trend-following funds called managed futures funds have outperformed hedge funds this year by making a killing from the dollar's rally, the plummet of emerging markets and the collapse of commodities.

With $234.1 billion in assets, these funds gained 8.9% year to date through October, while the average hedge fund lost 18.9%, according to preliminary data from research firm Barclay Hedge. Barclay, which isn't related to Barclays PLC, doesn't consider managed futures funds to be hedge funds, though other data trackers do.

At managed futures funds, traders typically use customized trading algorithms to spot market trends and place bets on futures and other derivatives. Instead of focusing on fundamental supply and demand, traders wait for their system to signal whether it is time to enter or exit from the market. When a trend reverses, trading systems are supposed to be quick to spot the change and move in another direction. Full story...

Tags: Trend Following Funds Hudge

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