Trend Following Wizards: main CTA funds in the red in 2009!

[JezLiberty]

Every month I compile a list of the major funds in the trend following space to see how they perform, if they are correlated to each other, etc:
see the list here

We can see that last year (2009) was not as good as 2008 for trend followers with an average performance of -7.3% across the board.. (Not that this is unexpected for this style of management...)

This is also interesting to see hoe they seem to be fairly closely correlated: November was nearly all "black" while December is nearly all "red"

 

[nazzdack]

Quote from JezLiberty:
This is also interesting to see how they seem to be fairly closely correlated: November was nearly all "black" while December is nearly all "red"

Traders of a feather, perform together.

 

[MKTrader]

Quote from JezLiberty:

Every month I compile a list of the major funds in the trend following space to see how they perform, if they are correlated to each other, etc:
see the list here

We can see that last year (2009) was not as good as 2008 for trend followers with an average performance of -7.3% across the board.. (Not that this is unexpected for this style of management...)

This is also interesting to see hoe they seem to be fairly closely correlated: November was nearly all "black" while December is nearly all "red"

Not to be Captain Obvious, but 2008 was more than ideal for TF and breakout traders.

While there were certainly trends in 2009, they were more like 2003-2006 trends: low-volatility, choppy and usually not rewarding to those who "let profits run" instead of taking smart profits.

 

[JezLiberty]

Quote from MKTrader:

Not to be Captain Obvious, but 2008 was more than ideal for TF and breakout traders.

But yet 2008 was quite outstanding for most CTAs on that list...

My assumption is that trend following can be geared to look at many different trend lengths which determine how you get affected by noise/reversals (and the resulting losses). Possibly, CTAs are trying to capture shorter-term trends and got caught up in “chops” at that level in 2009 – whereas there did not seem to be any chops at a higher timeframe (e.g. MA Golden Cross 200/50). So everybody might have different perceptions of how trendy/choppy markets were - depending on the timeframe they look at.

2008 had some serious trends and breakouts: Oil for example! but also Gold and lots of other commodities (both up and downside). Equities also experienced dramatic moves...

One of my goal is to compile a collection of trend following systems with different trend lengths to use as a more transparent benchmark (compared to tracking CTAs) of when trend following produces positive/negative returns.

 

[nazzdack]

Quote from JezLiberty:
.....a more transparent benchmark (compared to tracking CTAs) of when trend following produces positive/negative returns.

Couldn't you save yourself a lot of "work" and merely use the absolute value of the performance of the S&P-500 as a reasonable reference?

 

[JezLiberty]

Quote from nazzdack:

Couldn't you save yourself a lot of "work" and merely use the absolute value of the performance of the S&P-500 as a reasonable reference?

Not sure what you mean?...

How would that tell me how trend following has performed over a range of strategies and instruments for different timeframes?

I think this is, as you say, a "lot of work" I am about to embark but I am not sure what shortcut you are recommending (please do expand if I am missing something...)

 

[nazzdack]

Quote from JezLiberty:
-----How would that tell me how trend following has performed over a range of strategies and instruments for different timeframes?
-----I think this is, as you say, a "lot of work" I am about to embark but I am not sure what shortcut you are recommending (please do expand if I am missing something...)

1) The "gist" is that most funds; regardless of strategy, instruments traded or timeframe, do not outperform the S&P-500.
2) To develop a "new" benchmark is futile when such a "good" one exists already.

 

[JezLiberty]

well I guess it depends if you think you can beat the S&P500 or not...

Trend Followers clearly can outperform S&P 500 both on short term (cf 2008) and long term ..

Check the VAMI chart on that report for example. S&P 500 is not a good representation of how trend following does..

http://autumngold.com/Advisor/Statistics/cta_profile.php?op=profile?&id=107

 

[nazzdack]

Quote from JezLiberty:
------Trend Followers clearly can outperform S&P 500 both on short term (cf 2008) and long term ..
-----Check the VAMI chart on that report for example. S&P 500 is not a good representation of how trend following does..

1) Yes, sometimes.
2) That guy was down ~5% last year while the S&P-500 had a ~27% gain. I guess he missed a major trend. The S&P-500 clearly doesn't "represent" how "well" he did.

 

[thetrendfollowe]

I still don't understand WHY 2009 was a poor year for trend following CTAs?

These guys trades futures right?

There were massive trends in Gold, Oil, ES (and just about any other stock market index), AUD/USD.

What gives??