2008 was a wonderful year for CTAs. Almost everyone performed greatly when everyone else is losing their money. Strangely, since 2009, CTAs suffered a long-drawn draw-downs that continues today Aug2018. What happened? What has changed in the market? Why the drawdowns since 2009 with no recovery in sight despite almost a decade has passed? What can aspiring elite traders learn from this long "torture"? Many professional traders will fail with a drought that last for so many years. Not all full-time professional traders have the luxury to prosper with other people's money in the form of management fees despite making losses.
I don't think it is luck. Most CTAs are suffering draw-down during the same period. It cannot be that coincidental that most participants are suffering bad luck at the same time. Something fundamental has changed in the market that has affected the industry. CTA trading strategy is no longer working well since 2009. It remains to be seen if they can recover in future.
Let me say it another way.... You're right... they can't all become "unlucky" at the same time. More likely, the money managers who have been falling off over the last 10 years were really just "no talent hacks" who had no business racking up impressive gains in the first place... IOW, they were more fortunate than smart... the "market hit them" rather than "they hit the market". Since, reality has settled in. Feel better now?
Which CTAs are are still in drawdown since 2009? I looked at a few trend following CTA. They had poor performance vs S&P 500 but it has not been negative for the ones i looked at. eg: https://ctaperformance.com/wntn I also looked at Tactical, Chesapeake, Cambell, Crabel.. Poor performance, for sure, but not negative since 2009. Which ones exactly had High Water Marks before 2010 and still below that level today?
This is the infamous chart of dunn capital, they had a really bad 5 year period between 2003 and 2008. But even they have been doing ok since 2009:
I think to determine how smart vs fortune that there's a bull market, you should look at the correlation of their performance vs relevant indices. Compare various statistical metrics. Determine if the returns are simply due to correlation with a particular index. For example, even if their gains are highly correlated with say the S&P500, they could still be smart if their draw downs are lower. However, if they effectively mimic a leveraged S&P500 play, then they are simply fortunate. EDIT: Lower returns also aren't necessarily bad. They may have a strategy that results in lower risk and perhaps even higher risk adjusted returns. Returns aren't everything, but it should be expected that some of the smart players would actually under perform those who are fortunate in a bull market. Of course we then would expect those smart players to out perform when the market is down or sideways.
Smaller to smallish CTAs are doing OK to pretty well the past few years. There’s actually a NEED for performing CTAs in the commodities space.