NexusFi: Find Your Edge


Home Menu

 





CTA Performance


Discussion in Emini and Emicro Index

Updated
      Top Posters
    1. looks_one indextrader7 with 3 posts (0 thanks)
    2. looks_two AdamGG with 1 posts (0 thanks)
    3. looks_3 imPairsonator with 1 posts (1 thanks)
    4. looks_4 Quick Summary with 1 posts (0 thanks)
    1. trending_up 4,122 views
    2. thumb_up 1 thanks given
    3. group 3 followers
    1. forum 5 posts
    2. attach_file 0 attachments




 
Search this Thread

CTA Performance

  #1 (permalink)
 indextrader7 
Birmingham, AL
 
Posts: 1,065 since Apr 2012

I am pretty perplexed when I look at the performance of as many CTA's as I can get my hands on. Why are so many of them so bad?

I understand (from academic studies) that there is an inverse relationship between the size of the fund's assets under management and the returns (more assets = lower returns), but excluding that and even looking at smaller funds, they're not so hot either.

I've not only considered absolute returns, but also taking a look at drawdowns as well to get an idea for risk-adjusted performance of the fund manager.

Some of the better performing funds this year (+40-60% returns) nearly all have equally large (or larger) drawdowns. Not good.

I'm sure I haven't found all the funds, but I've looked at the best that barclayhedge, attain, etc have to offer.

What is the deal? I assume there are many traders here at futures.io (formerly BMT) with superior performance both in absolute and risk-adjusted terms. I know many of the traders will want the simplicity and ease of doing their own thing and not dealing with starting a CTA and managing other people's money, but surely this doesn't encompass ALL very successful traders.

Am I not considering something? Am I mis-informed in some way? Looking forward to hearing from others on this.

-IT7

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Exit Strategy
NinjaTrader
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Futures True Range Report
The Elite Circle
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
60 thanks
Funded Trader platforms
43 thanks
NexusFi site changelog and issues/problem reporting
24 thanks
GFIs1 1 DAX trade per day journal
22 thanks
The Program
19 thanks
  #3 (permalink)
 imPairsonator 
Thessaloniki, Greece
 
Experience: Beginner
Platform: QTS
Broker: IB
Trading: Equities, NQ
Posts: 166 since May 2012
Thanks Given: 104
Thanks Received: 395


There's a nice (academic) paper that suggests that CTAs as an asset class are essentially a scam. On average they don't achieve high returns, and what they manage to achieve is mostly captured by the fees.


Quoting 
during the period 1994-2007 CTA excess returns to investors (i.e., net of fees) averaged 85 basis points per annum over US T-bills, which is insignificantly different from zero. We estimate that CTAs on average earned gross excess returns (i.e., before fees) of 5.4%, which implies that funds captured most of their performance through charging fees. Yet, even before fees we find that CTAs display no alpha relative to simple futures strategies that are in the public domain. We argue that CTAs appear to persist as an asset class despite their poor performance, because they face no market discipline based on credible information. Our evidence suggests that investors' experience of poor performance is not common knowledge.

Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors by Geetesh Bhardwaj, Gary Gorton, K. Geert Rouwenhorst :: SSRN

Naturally there are many skilled managers who do far better, but I suspect there are reasons why that type of trader would tend to choose to start a hedge fund instead of a CTA.

Follow me on Twitter Reply With Quote
Thanked by:
  #4 (permalink)
 indextrader7 
Birmingham, AL
 
Posts: 1,065 since Apr 2012


imPairsonator View Post
There's a nice (academic) paper that suggests that CTAs as an asset class are essentially a scam. On average they don't achieve high returns, and what they manage to achieve is mostly captured by the fees.



Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors by Geetesh Bhardwaj, Gary Gorton, K. Geert Rouwenhorst :: SSRN

Naturally there are many skilled managers who do far better, but I suspect there are reasons why that type of trader would tend to choose to start a hedge fund instead of a CTA.

What reasons do you suspect one would start a hedge fund over a CTA?

Reply With Quote
  #5 (permalink)
 indextrader7 
Birmingham, AL
 
Posts: 1,065 since Apr 2012


imPairsonator View Post
There's a nice (academic) paper that suggests that CTAs as an asset class are essentially a scam. On average they don't achieve high returns, and what they manage to achieve is mostly captured by the fees.



Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors by Geetesh Bhardwaj, Gary Gorton, K. Geert Rouwenhorst :: SSRN

https://realitycheck.no-ip.info/library/E-Books/Commodity%20Trading%20Advisors%20-%20Risk,%20Performance%20Analysis,%20And%20Selection.pdf


A different view....

Reply With Quote
  #6 (permalink)
 
AdamGG's Avatar
 AdamGG 
Windsor Ontario
 
Experience: Beginner
Platform: Ninja
Trading: ES
Posts: 14 since Apr 2012
Thanks Given: 4
Thanks Received: 9

Yes, retail traders are presented with quite optimistic projections of expectations and success rates. I believe the actual retail trader success rate is maybe 5% actually succeed - the rest donate. In regards to CTAs I have heard that their average is maybe 10% (good ones). If greater that that then more is being put at risk.
If lots of retail traders (>5%) could generate +10% returns then there would be a lot more happy traders a round. The same holds true for CTAs (or hedge funds).
Yes, there are exceptions and I am sure many of the esteemed traders here are 5%ers.


AdamGG

Reply With Quote




Last Updated on July 25, 2012


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts