CTA Fund Performance Report – 30 April 2020 – “Here be Dragons”

Tread carefully my friends. You are on the edges of the known world and lurching into the abyss. April saw a monumental moment that heralds a sign of future uncertainty. Where oil prices lurched into negative territory.

For many who were under the assumption that zero was bed-rock….you need to realise that the zero was a reference point of our own making. In the world of uncertainty….anything that lies within the realms of possibility ‘really’ exists.

So how do we navigate this very unfamiliar terrain? Attach a safety rope to your broadened domain of certainty and take very small steps. Imagine you are traversing a glacier with lots of hidden crevasses. Take it slowly, sure-footedly and carefully. Always apply your rules based process which manages risk at all times and don’t let that brain of yours which has no experience in this unfamiliar terrain, interfere with the process.  Never stray too far from safety, take your time and be patient.

As readers are aware we already have a purpose built technique that we apply to specifically address uncertainty. It is the technique adopted by systematic diversified trend following advocates and the subject of this monthly performance report. These are the price followers who never stray too far away from current price, cut their losses short at all times and simply leave their profits open to the unpredictable bounty that an uncertain market will deliver from time to time.

So let’s see how these guys are faring for the month of April.

We use NilssonHedge for reporting purposes which allows us to expand our performance coverage to include a broader array of long term established FM’s who occupy the CTA space and have been in operation since 1 January 2000 to the current day. This performance report focuses only on those funds with a long term track record (approx 20 years). The reason we adopt this long term horizon for reporting purposes is that to survive in these financial markets over such a long timeframe and still be alive today offering absolute returns to the client takes a special breed of Fund Manager who has expertise in surviving the turmoil of a variety of different market regimes. We like these guys and that is why we focus on them. As the years roll on we will progressively expand our coverage to include those FM’s who narrowly miss out in their inclusion when they reach the 20 year performance track record horizon.

So far for the month of April 2020 we have 52 CTA’s reporting and within that grand total we have 34 Systematic Global Trend Following funds. We have to draw the line somewhere and the slow coaches unfortunately miss out.

For those that like the detail, below are the index constituent performance results for the CTA Composite Index (52) and the TF Global Index (34).

The CTA Composite Index 52 was up 0.83% for the month bringing the calendar year to a breakeven position of 0.18%….and the TF Global Index 34 was up 0.28% with a fairly solid YTD contribution of 3.95%

Systematic Trend Following Global Index Overview

Now as ardent trend followers ourselves, we like to narrow our focus to the Systematic Diversified Global Trend Following community of CTA’s.

For an overview of what moved and what didn’t for the month in this investment space then you should go straight to the source and listen to the Fund Managers themselves.  In this regard, there is no better resource than that provided by Niels Kaastrup-Larsen of ‘Top Traders Unplugged’ and (Dunn Capital Management) in his Systematic Investor Series with Moritz Seibert with special guests and in Niels’ Market Barometer blog series.

Top 10 by CAGR since 1 January 2000

Below is a performance table and an equal weighted performance chart of the top 10 performers of the Long Term Trend Following Index Composite in terms of annualised returns to investors (net of all fees and expenses) since 1st January 2000.

Here is a scatter plot that highlights where the top 10 sit in terms of their Compound Annual Growth rate (CAGR) and Maximum Drawdown over the performance monitoring period.

Below are the performance metrics of the Top 3 from this Top 10 list by CAGR. Just look at those returns. It might be a bumpy journey along the way….but when these guys nail it…they hit it out of the ball-park.

Top 10 by Risk Adjusted Return (using the MAR ratio) since 1 January 2000

Now onto the risk adjusted return category. This category is for those that get ulcers when riding the drawdowns of leveraged volatile equity curves. Here are the results of the Top 10 in this category.

….and the top 3 from this Top 10 category.

Top 3 Equal Weighted Combination Portfolio – The Blend of Blends

Now as great as the individual risk adjusted returns of the Top 10 in the prior category are….we can do better when we look at the performance of possible combinations from the TF list. We iterate across the TF Index to find the Top 3 in terms of Risk Adjusted returns as a combination portfolio each month. So for those avid readers looking for the best risk-adjusted result of a possible equal weighted threesome….here is the result for the month.

Just look at those risk adjusted metrics. With a bit of leverage we can reach for the stars with this combination 🙂

The 3 contributing funds for this month based on an equal weighted blend are as follows.

Top 10 for the last 12 months

So how are the guys going in the short term? There is enough style drift in this camp to observe significant variation in performance returns over the short term. Some of the mob have performed strongly over the last 12 months.

….and the top 3 from this Top 10 category.

Well that’s a wrap for the month… During these unsettling times stay safe, bet small and simply cut your losses short and let your profits run. We have no idea how or when the dust is going to settle. All we do is follow price using robust trend following systems that have been rigorously tested across as wide a range of different market conditions as we can muster.

Leave your prediction engines behind and focus on how best to tackle an uncertain future.

Trade well and prosper

The ATS mob

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