2012 was a tough year for CTAs but as William Mitting found, that has not shaken belief in long term returns.
Last year was a tough one for CTAs as markets were
over-correlated and moved more by government intervention and
"risk-on, risk-off" plays than fundamentals. The sector ended
the year down, the first two consecutive years of draw-downs in
its history. However, many funds are sticking to their
strategies and riding out the storm.
In September, John W Henry, one of the most venerable
managed futures funds in the market, sent an e-mail to clients
informing them it would no longer be accepting client funds. It
marked a significant fall from grace for the CTA, which almost
a decade ago was managing over $3bn. However, with the fund
down double digits for the year and no end to the tough market
conditions in sight, the will to rebuild had been lost.
The reactions by fellow CTAs was notable for the lack of
surprise. "The problem is that JWH hasn’t adapted
its strategies," says the head of one CTA. Many JWH programmes
were also notoriously volatile, based on high risk, high
returns. Research by managed futures broker Attain Capital,
found that JWH strategies were around 2.25 times more volatile
than the BarclayHedge CTA index during the first 20 years and
3.49 times more volatile over the past eight years.
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