February 22, 2018
rcm-alternatives
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While much of a fund manager or CTA’s job is creating alpha generating trading signals (you know – the things that tell them when and where to get into the markets), the execution of those signals is becoming more and more important as the professional trading space becomes more and more automated and computerized during what we’ve dubbed the Quant Revolution.
In a new whitepaper detailing Best Practices in Algorithmic Execution by RCM’s newest business unit, RCM-X, we find just how automated things have become. Between 2015 and 2017, the CFTC found that up to 80% of all trades in the futures markets are done by automated trading. To be clear, we’re talking here about the actual placing of the buy/sell/stop/limit/etc. signal with the exchange via an API connection between the professional trader’s servers and the exchange. They highlight a simple example of crossing the spread (buying at the offer and selling at the bid) every time you enter and exit the market. Add up these trades throughout a year and it could mean the difference between a good year and a great year.
RCM-X was launched in 2017 to provide trading technology and risk management services to the professional trading and investment management space (that’s you CTAs, CPOs, hedge funds, and prop firms). In effect, it was our answer to the question put to CTAs we work with – asking whether they believe their execution is a strength or a weakness. It was the answer to the ever more frequent question in this automated world: What’s a CTA to do? The answer, it turns out, is a CTA should be using customizable execution algorithms and sophisticated transaction cost analysis (TCA) tools as a best practice to minimize slippage by quantifying these dynamic costs created by an ever-changing market.
The RCM-X team has settled in nicely at RCM so far, building out a full suite of both stock and futures market execution algorithms as they add contract specific parameters to each algo; and we finally broke them away from coding long enough to get them to write up this whitepaper giving an overview of why algorithmic execution is important, and who (not just the managers, investors in the products need to take heed too) should be asking for it.
Click here to download the whitepaper
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, 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.
The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.
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. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.
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.
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Limitations on RCM Quintile + Star Rankings
The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.
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