The Greener Grass of Ag Traders

When we categorize CTAs, we tend to group all the traders who focus on agricultural markets together. Whether their trading methodology is that of a trend follower, discretionary trader, or even options; it is the focus on Ag markets that we find to be the most meaningful. We’re not alone in this: the BarclayHedge CTA Index breaks out the performance of Agriculture Traders, or Ag CTAs, too.

Now, the BarclayHedge categorizations are self-reported, so take it with a grain of salt (pun intended); and we’ve talked a lot about the good performance of Ag traders last year, but with the 2012 numbers nearly all in, we couldn’t help but share the BarclayHedge subindex performance of 2012:

Disclaimer: past performance is not necessarily indicative of future results.

As we pointed out in our 2012 strategy breakdown, while most of the managed futures world saw losses or only modest gains, Ag CTAs put up a respectable 5.4%. The key here is that grain markets tend to be very closely aligned with factors that are unique to those markets: USDA reports, choices that farmers make about planting/selling their harvest, and as we saw this summer, the weather. And that can often translate into big moves independent of the rest of the market, like corn’s 7.5% rally over the last week or so:

Chart courtesy Finviz.com.

Against this backdrop, some Ag managers are off to a great start, with M6 Capital up an estimated 1%, and Rosetta Capital up an estimated 1.3% so far in 2013. (the maximum drawdowns for those programs are -15.4% and -39.7%, respectively).  (Disclaimer: past performance is not necessarily indicative of future results)

However, this should definitely not be read as an argument that Ag CTAs are “better.” The fickle grain markets can be a double-edged sword, just as easily dragging Ag traders down if the conditions are wrong. Case in point: last year Global Ag gained 14.5% in April, only to give it nearly all back with a -12.1% loss the next month. In the end, though, an outstanding 2nd half of the year left Global Ag up an estimated 35.2% for 2012 (its maximum drawdown is -17.6%). (Disclaimer: past performance is not necessarily indicative of future results) And as always, we don’t recommend performance-chasing, or getting into one of these programs while it’s still “hot.” The best approach, in our opinion, is to invest when a solid program enters a drawdown period, to hopefully capitalize on the climb back to new equity highs.

In the end, like always, it comes down to diversification. You wouldn’t put your entire equities allocation into a single stock, and you shouldn’t count on one CTA (or one type of CTA) to provide managed futures exposure. Grain exposure is part of a balanced portfolio that, in 2012 at least, proved quite valuable.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.