http://www.reuters.com/article/2013/02/14/uk-winton-investors-outflows-idUSLNE91D00E20130214 " One investor told Reuters that he had reduced exposure to CTAs by about two thirds since 2008 because of poor returns. However, CTA performance has picked up since December, helped by a rally in riskier assets such as equities. Winton is up about 2.5 percent this year, AHL has gained 2.1 percent since January 1 and BlueTrend rose 3.8 percent in January. "Performance in 2011 and 2012 was poor," said Chris Topple, global head of prime clearing services at Newedge. "They (CTAs) definitely need a good year in 2013." "
I've never understood why regular investors would invest with CTAs; futures really are too leveraged for the common investor, best to stick with similar ETFs.
What is the future of trend following CTAs and futures funds? 05 March 2013 Steven Michael of Stonehenge Asset Management looks at the future of trend following. http://www.fow.com/Article/3164229/...f-trend-following-CTAs-and-futures-funds.html " According to the Barclay CTA index, 2011 was the worst year while 2012 being the second worst year. Not only were 2011 and 2012 the first period experiencing consecutive down years in a row, they were notably the two largest losing yearly periods over the same thirty two year time frame. Prior to 2011, the worst year experienced by the index was (-1.19%) in 1999. In light of the less than remarkable past two years, it remains very difficult to find an investment class with better overall returns. This mere fact is the primary factor that has driven the growth in this industry. I want to examine what has driven this asset class to deviate in 2011 and 2012 so far from such an incredible history of superior returns. It seems two atypically poor years is enough to shake the confidence of some in the industry. That's a big mistake. Not only is the vitality of trend following far from over, I expect 2013 to be a great year for trend following CTAs. To begin with we need to examine in particular what drives such superior returns for trend following CTAs in the first place. ... Many of the trend following CTAs which are the leaders of this sector have had very devastating years in 2011 and 2012. A few major participants such as John Henry have closed in 2012. The remaining managers should prove to be good investments in 2013 and beyond. Using this weakness for investment timing is sensible. Other factors which support the conclusion that trend following CTAs are the time to buy: ... "
Saying 'futures are leveraged and ETFs are not' is a big misconception. Both instrument classes (futures and equities/ETFs) can be as levered or unlevered as one desires. In fact this applies to most any asset class (bonds, physical real estate, spot FX etc.).
I think the investor sentiment of "buying on a draw down" is one of the most unscientific, pointless axioms ever. Few of them phrase it this way, but they are essentially saying they think managers are negatively auto-correlated, that there's fundamental mean reversion. Gains will be more likely followed by losses and vice versa. But, why? I can't think of a convincing explanation of why that would be. As far as I can tell, my strategy is memory less. If there is any auto-correlation, statistically it actually verges on the positive.
i tell ya, Winton alone is making trading on futures markets more and more difficult. markets are so efficient , that its REALLY hard to make more than 1% a month. it would be great if Winton would have a big DD now and lose most of its assets !
Probably the edge of individual CTAs could be diminishing over time. Seems the overall returns generated by the whole CTA industry has been reducing too, based on the CTA index history in the last 20-30 years. http://www.fow.com/pdf/CTArt.pdf " And so itâs a fixed amount of money that has to be divided further between firms that are providing the same service as we are. So if you want to be a better CTA, youâd better understand where other CTAs stand, what their capabilities are and how can you stay ahead of the curve, because otherwise you are going to be trading against each other which ultimately leads to a zero profit and loss, or maybe the CTA that is a little more skilful will gain on you "