It seems CTA programs have been having problems since central banks instituted QE. This is interesting article with chart.
Interesting CTA performance Chart
- Thread starter bashatrader
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MattZ
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When it comes to Commodity Trading Advisors, I suggest to look at individual CTAs and not follow a statistic that puts them together. First, CTAs are diverse in their approach to trading, and some may trade grain and cattle while some are short volatility traders. Second, averages mix CTAs in a way that does not make sense from a risk-reward standpoint, again, because of the variety of strategies they employ.
Although the industry and many others treat Managed Futures as an asset class, many times, you will find that you have to focus on the performance of the individual trader: his/her appetite for risk, management of drawdowns, recovery of drawdowns, and the risk-adjusted returns.
Although the industry and many others treat Managed Futures as an asset class, many times, you will find that you have to focus on the performance of the individual trader: his/her appetite for risk, management of drawdowns, recovery of drawdowns, and the risk-adjusted returns.
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Yes CTAs have struggled a lot because of external interference propping up the equity markets. QE has created one of the longest bull runs in history (over ten years now) and CTAs tend to perform well when there is market instability. The best year for CTAs over the last 50 years was undoubtedly 2008 when the equity markets crashed. Commodities tend to trend strongly when there is a hard equity market crash and these strong trends are fairy easy for CTAs to benefit from. However, when the market appears to crash and then governments use QE to artificially prop the markets back up CTAs get hurt as the trends reverse and they lose money rather than making a profit.
Interest on unused funds is a profit center in itself. For example, a fund with $100mil in assets that rarely employs more than $20mil in margin is a natural lender of $80mil. (usually in liquid, short term instruments such as 3mo T-Bills)
Obviously, when those instruments are yielding 5% they boost overall returns more then if they're 1.0%. (let alone 0.37%)
Obviously, when those instruments are yielding 5% they boost overall returns more then if they're 1.0%. (let alone 0.37%)