What All Volatility Calculations Are Missing
Newedge released a paper last year arguing that the way volatility is normally calculated for CTAs is flawed because it ignores autocorrelation. The arrival of a more reader-friendly writeup seemed a good occasion to revisit the piece, and what it means for the way we measure risk in the managed futures world.
Managed Futures and the “Smirk” Curve
A new paper examining CTA returns has taken a closer look at the “smile curve” we first saw in AQR’s 100 Years of Trend Following. This time, however, they’ve used monthly data and included stocks, bonds, and commodities, illuminating some interesting patterns in the distribution of CTA returns.
Weekend Reads
Always sell in May and go away… except when the first two weeks of May produce more than a 5% gain in the S&P 500 (Disclaimer: past performance is not necessarily indicative of future results). Who knows? Maybe the second half of the month will produce the drop that the bears have been predicting for […]
Gold Forming Classic “Frowny Face” Pattern
Not to heap any more on the unfortunate gold bugs – they’ve had it bad enough lately. We just wanted to draw your attention to a chart pattern we’ve been watching as it has developed: the classic “frowny face” pattern.
Alternatives Demand Set to Soar?
A new survey predicts demand for retail alternative products will soar in the coming years. It’s good to see more investors seeking access to alternative investments, but with new products springing up all the time, the world of retail alternatives is quickly becoming a difficult place to navigate.
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any 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.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, 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.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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