What are reasons behind the long-drawn draw-downs of CTAs since 2009?

helpme_please said:
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.
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Check out the CRB index. It had a STRONG upside bias 2001-2008. Easy to conclude that successful CTAs also had a long bias... which was correct for the time. Since 2008 peak, commodities have had a strong down bias. If CTAs were prone to still having a long bias (not because they couldn't read a chart but because it's "part of their DNA" as it is for most market players), they would struggle.

IOW... the markets' long-side bias hit the CTAs' long side-bias... and VIOLA! Success. But when the market's bias shifted to negative, the CTAs were still trying to BTFD and always give the benefit of the doubt to the long side..
 
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Scataphagos said:
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.
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Pardon for quoting myself.

It's not that they were "completely no-talent hacks"... they were likely long during the markets' run up. They got that right to varying degrees. But the true measure of a money manager is to "successfully adapt". CTAs whose performance has suffered since 2008 did not adapt well to the markets' change.

Same can sort-of be said about several of the big name money managers who made a bundle shorting the 2007 top. I say "sort-of" because those guys were mostly playing a narrow theme... like "short sub-prime mortgages". They made lots of money, got lots of favorable ink... but have since fallen into disfavor, losing 70-80% of their AUM. Even the richest, brightest and most famous are not immune from the market's vagaries.
 
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