Steven Michael of Stonehenge Asset Management looks at the future of trend following.
The managed futures industry has enjoyed a very good record
of average annual returns (over 11% per year) while weathering
only six down years in the last thirty two years. However, it
has been a dismal year for trend following CTAs and a time
where the industry experienced some notable firsts. The Newedge
CTA Trend Sub-index has seen two consecutive down years for the
first time in its history.
According to the Barclay CTA index, 2011 was the worst year
while 2012 being the second worst year. Not only were 2011 and
2012 the first period experiencing consecutive down years in a
row, they were notably the two largest losing yearly periods
over the same thirty two year time frame. Prior to 2011, the
worst year experienced by the index was (-1.19%) in 1999. In
light of the less than remarkable past two years, it remains
very difficult to find an investment class with better overall
returns. This mere fact is the primary factor that has driven
the growth in this industry.
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