CTA Fund Performance Report – 30 September 2019 – Ouch!!!!!!

Here we were last month losing ourselves in euphoria as we had finally lifted into new dizzying equity heights saying farewell to persistent drawdowns…..and then Mr Market got all upset and delivered a haymaker to keep us in check. I may have to be a bit more subdued in the future as it pays to stay humble in this game.

I think Niels Kaastrup-Larsen summed the month up well in the following “September was a month full of corrections and surprises in global markets as easing U.S.-China trade tensions and evidence of continuing U.S. economic growth resulted in a fierce unwind of risk-off positions that had performed well in previous months. Add to this an attack in Saudi Arabia that sent chock-waves through the energy markets producing some severe price spikes across the entire complex…also against the direction of the longer-term trend. So needless to say, it was a challenging month for trend followers.”

Most of the damage was related to significant corrections in the bond markets so those TF firms that were not heavily invested towards this sector avoided the king hit. Let’s have a minutes silence however for those who were over-exposed to this segment.

A minute is over….now onto the performance report.

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 September we have 59 CTA’s reporting and within that grand total we have 37 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 (59) and the TF Global Index (37).

The performance charts below show the impact of the sharp corrections in September felt by many in the CTA community. Despite the slap in the face, it is a mere blip in the scheme of the bigger picture (he says as his coach wipes his beaten brow). The CTA Composite Index 59 is still up 7.74% calendar year to-date despite the -4.58% negative impact for the month….and the TF Global Index 37 is up 7.94% for the calendar year with a similar -5.18% hit for the month.


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 and Jerry Parker.

I envy all those attendees of the Top Traders Live get together in New York which is underway as we speak. Perhaps a trip in the next few years to the land Downunder chaps? We have some unusual asset classes for diversifying your portfolios that include kangaroos and koalas plus every form of poisonous snake and insect that ever existed.

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. 


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 10 for the last 12 months

So how are the guys going in the short term? Some of them have been powering ahead despite this month’s hiccup.

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

Well that’s a wrap for the month…but before I go I would like to share some food for thought.

First a puzzle for you to consider that demonstrates a very powerful mantra adopted by the trend following community. I won’t give the mantra up….for that is for you to work out. Compare and contrast the monthly returns of the TF Global Index 37 and the S&P500TR Index. What do you see and what is the mantra that gives rise to these results?

I also thought I would share the following discussion I had with a retail trader who asked….why do I bother tracking the performance of the best funds in the world? After all I am a retail trader myself who trades a piddling systematic diversified portfolio with only a very short term track record. What is the point?

Well to respond to this I would make the following broad generalisations. You need to always keep in the back of your mind what realistic expectations mean. If you are of the opinion that trading is your ticket to riches with returns that far exceed the ‘best in the world’ and drawdowns that are below the ‘best in the world’, you are positioning yourself towards a future disaster. Worse still is your propensity with this belief system to believe that you can predict these markets over the long term. Armed with a predictive and unrealistic mindset we can add further toxicity into this equation of ruin by enhancing leverage.

Realism also extends to the nature of drawdowns as well. A year or two of persistent drawdowns is the rule as opposed to the exception. Learn to embrace them. If you have an equity curve that fails to accept drawdowns…then it is likely that you are the patsy in this trading exercise.

By recognising that you, even in the best scenario, are likely to plot somewhere below these top funds in the world, puts you in a good position to dial down your expectations and recognise the degree of due diligence you actually need to take to master these markets. 

This mastery comes from objective as opposed to subjective evidence. These funds, particularly the funds comprised with in the TF Global Index are not ‘black boxes’ and are more than willing to broadly share the key issues that matter in this game. Listen to them….not the gossip you may here from those who cannot produce such a stellar and verified long term track record. It will save you many years of pain in this very tough game called trading. 

Trade well and prosper

The ATS mob


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