CTA Fund Performance Report – 31 December 2019 – “We are certain about uncertainty”

Well trend followers, the 31st December 2019 brings an end to an average year and a psychologically tough decade. It is once again time to have a look at overall performance and see how we are all tracking.

For the TF Global Index which comprises 35 of the top long standing global diversified trend following funds, it certainly has been a tough ride at least since  March 2015 where many of the FM’s in this class have been stagnating and generally spinning their wheels getting nowhere. But hey….that is just how the cookie crumbles. Provided we are steadfastly sticking to our rules and are patient in our expectations, then our understanding of how these markets behave allows us to be confident that it really is just a waiting game. It is not ‘if’…..but rather ‘when’ that makes our game tough.

One of the most essential pre-requisites for our style of trading is the need for enduring patience….when all about us seems rosier. Not many want to join us in enduring this hardship …but that is just how we like it. That is what makes alpha so persistent with this technique.

You see the decades of research that we hold dear to our heart demonstrates that it is the nature of the markets themselves to unpredictably shift regimes and undergo transitions…but the small problem is that no-one actually knows how to predict these dramatic market events……so if you are after cashflow and return certainty….then you are in the wrong game.

If on the other hand you are patient and are looking for life altering wealth building returns, then you really need to flip your mindset about how you play this investment game.  Throw away your thoughts of instant gratification or regular cashflow which is a fiction in our technique and understand where our edge resides. Life is not a game of roses…it is filled with life altering events….and it is those major outlier events that we are hunting.  If you want to play with us over the long term and participate in the significant wealth pool that comes with our process…then you need to become very uncertain about certainty….but very certain about uncertainty. It is that uncertainty itself that delivers the magnificent long term track record for the diversified systematic trend followers.

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 December we have 53 CTA’s reporting and within that grand total we have 35 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 (53) and the TF Global Index (35).

The CTA Composite Index 53 is up 6.20% for the calendar year and posted a small positive gain of 0.36% for the month of December….and the TF Global Index 35 is up 4.57% for the calendar year and posted a small loss of -0.36% 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 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.

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? 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 and for the decade. Lots of ups, downs, and turnarounds…..but we can understand and appreciate that as we are patient trend followers…..aren’t we 🙂

Who knows what is around the corner…..but something tells me that if we just stick with it….we are not going to be disappointed. Cheers to an exciting decade ahead.

Trade well and prosper

The ATS mob

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