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Building Custom Portfolios on the new www.AttainCapital.com
February 25, 2008
As you saw in our Feb. 4th newsletter announcing the new and improved www.AttainCapital.com - we will be dedicating one of our weekly newsletters each month to highlight some of the features available on the new website. As always, we appreciate any and all feedback you may have, and welcome your comments. It was your comments which shaped this new site, and it will be your comments which take it to the next level from here.
To login, use the previous username and password you selected when first signing up for the Attain site. If you can't remember either one, just click forgot your password on the login screen, and we'll email your password to you to use with your email address as a username.
For those users who have been experiencing errors or odd behavior such as the inability to create a Watchlist, we have pushed through a fix, but it will require you to click the “logout” button under the MyAttain menu at the top right of the screen, and then log back in.
Highlights on some of the website’s New Features:
The entire focus of this newsletter’s ‘How To’ information will be on Attain’s Custom Portfolio tool. Attain firmly believes that a portfolio of lowly correlated programs which operate on different strategy types, markets, and time frames is the best bet for success investing in managed futures, and provides our custom portfolio tool to assist investors in constructing such a portfolio.
What's the ideal portfolio mix, however; all CTAs, a mix of day and swing trading systems? Those investments with the best numbers? These are tough questions, and the answers in many cases will depend on what the individual investor is after. Some may wish to maximize returns on pure risk capital - while others may be willing to invest $100,000 - but would pull the plug if down more than 25% or so. Attain’s custom portfolio tool lets our website users test different combinations to see what the best portfolio for them is.
Attain's belief is that the base of any futures based portfolio should be a professionally managed CTA program. There are several successful trading systems out there, but for a base investment - a CTA usually provides more consistent results which one can build on. There is usually a longer track record for CTAs, as well, which can give investors starting out more confidence.
For investors with more capital - the goal should be to mix and match different types of CTAs and trading systems with the goal of producing as smooth an equity curve as possible. For example, if trading an advisor like Zenith or ACE Capital who does poorly when volatility spikes, think of adding a system like Compass, which benefits from volatility spikes. Likewise, if already trading an option selling CTA - new capital added to the account should go to CTAs like Rosetta or Dighton, whose strategies aren't correlated to the stock market like the base investment. Adding those investments which do different things should keep the equity curve (a line graph of your portfolio's net value) from sharp spikes up and down, which we refer to as smoothing it out.
The most important thing is to not to fall into the trap of merely creating portfolios of the top performing investments. Instead, build portfolios that make sense on a fundamental level as well as a statistical one. What do we mean by that? Well - try and diversify between markets, time frames, and developers to get as much diversification as possible. While the portfolio returns may not be as high as a composite of the top performers this year - the long term prospects may be much better as you will have removed some of the historical bias built into the portfolio.
How to Build a Portfolio –
To build a custom portfolio, click on ‘Custom Portfolios’ under the ‘ Performance’ tab in the main menu bar along the top of the screen. Once on the Portfolios page, you can choose which CTAs, Trading Systems, and Managed F/X programs you would like to add to your portfolio by simply putting a check in the checkbox next to the program you wish to include.
The portfolio builder defaults to a listing of All recommended CTAs, but you can switch the table, and get to other programs to include, by clicking on any of the nine tabs immediately above the program names and statistics. You can also toggle between viewing just the recommended list, or the full list of programs under each tab, by clicking the “Click here to View all…” link directly above the table.
There are four tabs under CTAs, four under Trading Systems, and a single tab for F/X programs. The tabs allow you to filter the table further, by just showing Swing trading systems, for example, or just Discretionary CTAs so you can easily find the right program on a fundamental level (matching different strategy types).
As you check off programs to include in the portfolio, they will show up in the left hand column, where you can uncheck them to remove them from your portfolio. This area also lets you ‘Start a Portfolio From’ any one of the six popular portfolios listed by approximate starting capital level ($10K, $25K, $50K, 75K, $100K, and $250K). Selecting one of those dollar levels from the Start Portfolio From drop down box will automatically populate your portfolio with the programs in that popular portfolio. You can also choose to start from a blank slate (nothing in the portfolio) by selecting it from the drop down menu, or by ignoring this tool altogether.
Once you have made your selections, check the ‘Continue’ button under the portfolio components along the left side, or below the performance table. This takes you to the ‘Set Quantities’ screen, where you can choose how many contracts you wish to trade on a system, or how many allocations (in minimum investment blocks) you wish to make to a CTA or Managed F/X program. As you change the allocation levels using the drop down boxes, the Portfolio Initial Capital level in bold at the bottom of the page will automatically adjust, so you can keep tabs on how much capital the portfolio will take.
(A portfolio tool which allows you to notionalize a CTA, and allocate in amounts not divisible by the CTAs base minimum investment amount is already in the works)
Once you have decided on the allocation levels, click continue once again to generate the portfolio. The next page show you the sum of the parts, with a combined equity curve; return, DD, and other statistical measures based off the combined performance of the components; and a correlation matrix to allow you to see how the components are correlated with one another.
Change, Email, or Save Portfolio:
Along the bottom of the portfolio report, you have several choices for the portfolio you’ve created. If you don’t like a component or two, you can click on ‘Change Portfolio Contents’ and will be taken back to the first screen of the portfolio wizard. Likewise, if you just want to increase or decrease the quantities, check on ‘Change quantities’. If you want to share the portfolio with a friend, just click on email portfolio, and a form allows you to enter their email. Please note that merely copying the URL from the portfolio results page will not work, as it is a dynamic URL, and that only the email portfolio link will create a link which is static and can be visited again.
Finally, if you like the work you’ve done, you can save your portfolio for easy future viewing in your watchlist. Just enter a name for your portfolio in the text box on the bottom right of the screen, and click Save. The portfolio will be saved to your watchlist in MyAttain, allowing you to quickly see how it is performing whenever you return to the Attain site.
Other Portfolio Tips:
While most people will head to the main portfolio tool to build their portfolios, we have made it easy for users to start a portfolio from many different places on the site. For starters, when viewing any CTA, Trading System, or Managed F/X program’s detail performance page with its equity curve and monthly performance table, users can click the ‘Add’ button in the bottom right of the page under the monthly table to Add the program to a portfolio. Clicking the ‘Add to Portfolio’ button will automatically take users to the main portfolio wizard page, where the program they were looking at will be automatically added to a new portfolio as a first step.
This same functionality is available from any of the detail pages for each program, including the profile page, trades listing page for systems, and more. Just click the ‘Add’ button next to ‘Add to Portfolio’.
You can also add programs in your watchlist to a portfolio from the MyAttain dashboard. Simply check the checkbox next to the programs you want to add to a portfolio, and then click the ‘Create Portfolio’ button. This will automatically take users to the main portfolio wizard page, where the program they were looking at will be automatically added to a new portfolio as a first step.
As a closing comment, it is worth repeating that the most important thing when constructing a custom portfolio is to not to fall into the trap of merely creating portfolios of the top performing investments. Instead, build portfolios that make sense on a fundamental level as well as a statistical one. Diversify between markets, time frames, and developers to get as much diversification as possible. While the portfolio returns may not be as high as a composite of the top performers this year - the long term prospects may be much better as you will have removed some of the historical bias built into the portfolio.
- Lisa Smith
IMPORTANT RISK DISCLOSURE
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A late week rumor that bond insurer’s MBIA and AMBAC would be bailed out and prevented from entering possible bankruptcy kept US stocks from finishing in the red last week. SP 500 futures finished the week up +0.31% after trading lower for most of the week while Dow Jones futures were up +0.36%. NASDAQ futures fell -0.31% as the tech heavyweights including GOOG continue to be weak. In small cap trading Russell 2000 futures were down -0.91% while SP Midcap 400 futures climbed +0.66%.
In commodity trading prices continue to rise rapidly on inflation fears. Grains continue to lead the way with markets like Chicago Wheat +5.23%, Soybeans +3.38% and Corn +1.52% all posting strong up moves last week. Minneapolis Wheat was up +3.70% as well and is poised to have potentially an enormous run up as there is now no daily limit on the March contract. Softs also benefited from the grain rally with Cotton +7.68%, Coffee +6.56% and Sugar +3.41% all moving higher.
Elsewhere in energy trading Crude Oil futures closed above $100 per barrel for the first time last week and finishing +3.52% higher overall. Natural Gas futures also had a big run up, gaining +6.06% while Heating Oil futures +4.48% and RBOB Gasoline futures +1.85% also posted gains. Metals continue to be hot as well with High Grade Copper +7.46%, Silver +5.36%, Platinum +5.04%, Gold +4.60% and Palladium +1.41% all posting positive returns last week. Finally foreign currencies and US Treasury bond futures remain choppy with Eurocurrency futures gaining +1.09%, Dollar Index Futures lost -0.83% while US10 year note futures were nearly unchanged for the week.
After a tough January for many of Attain’s recommended CTAs, February is shaping up to be a nice rebound month.
The majority of our recommended CTA’s are tracking positive for Feb after another positive week last week, as commodities continued their bull run, giving opportunities for option sellers to collect premium from the spike in volatility and add to the bottom line for trend following CTA’s. The following are estimates for CTA/FX programs:
Attain Portfolio Advisors Modified Program continues to shine in February with gains of approximately +15% through the end of last week. The APA Main program has been no slouch either ahead approximately 4.5% for the month. Both programs have benefited from the continued bull run in commodities in markets like palladium, cotton, sugar and soybean meal while also catching short-term corrections in energies, livestock and foreign equities.
Other programs that are performing well in February are NDX Shadrach + 5.27 %, Dighton USA + 4.59 % and Crescent Bay +3.75 %. Dighton has been quiet recently after exiting several winning positions in soft commodities earlier in the month. Some other programs in the black for the month include Zephyr Aggressive + 1.73 %, Chicago Capital + 1.46 %, Wallwood FX + 1.14 %, Zenith Diversified +1.08 % and Zephyr Modified + 1 %.
On the other side, PFG K3 FX continues to struggle, unfortunately, down -8.5 % for the month. But the program did bounce back slightly at the end of the week.
Day & Swing
Equities struggled for direction last week as investors took in a slew of economic reports and watched commodities soar to new levels. Most of the economic reports have led investors to believe there will be further rate cuts necessary; however the recent move in inflationary-sensitive commodities like gold, silver and oil will certainly affect the Fed’s decision on future rate cuts.
The choppy trading conditions for equities did not bode well for day and swing trading systems, especially those that trade frequently and that use tight stops. Bond systems had mixed results after interest rate futures were particularly volatile last week in comparison to equities which usually trade inversely.
Despite the aforementioned choppiness in equities, a few swing systems were able to time the market correctly. Tzar ES, eRL and NQ all were profitable +$1,257.50, +$640 and +$110 respectively. The ES and NQ reversed short last week while the eRL held its short position. Mesa Notes was able to reverse long in the Ten Year Note near the weekly lows and made +$641.42. PGA Powergrowth 2 is holding short across the majority of the portfolio and profited +$110. Ultramini ES had two trades for a small profit of +$102.50
On the losing side for the swing systems was SeasonalST ES which lost -$212.50. Ultramini YM had one losing trade for -$640. Bounce EMD had a losing trade on Monday for -$689.23 while the eRL was not active. Signum TY reversed twice last week for a loss of -$4,536.70.
For the day trading systems, none of the systems were able to turn a profit. Bounce eMD MOC had the same result as the swing system -$689.23. Waugh eRL lost -$1,008.44 on four trades while Compass SP lost -$1,793.47 on one trade.
Rate futures ended the week at even to a touch higher, although a late week sell off on news of new backing for a bond insurance company erased strong gains. Long term trend followers remain in a mostly positive state with Aberration currently long TY with a current gain of $8002.75 (open trade), and Long the Euro-bund with a loss of -990.00EC (open trade).
The soft commodity sector continued to work higher as upside enthusiasm from strong exports and usage continue to be the main catalysts for the current move. The sharp rally in all varieties of wheat lost a little steam this past week, although the spring wheat traded at the Minneapolis Grain Exchanged capped the week with a strong rally heading into a new week with no limits on the near delivery March contract. The sugar market had a bit of a breather last week, although ideas that the Southern Hemisphere will move more cane to the ethanol industry rather that refining it for sugar continued to be a supporting factor. Aberration is currently long Beanoil with a gain of $13,074.00 (open trade), long Corn making $5700.00 (open trade), long Sugar making $2388.00 (open trade), and long Cotton losing -$440.00 (open trade). Relativity is currently long TGE Corn making 258,000JY (open trade), long TGE Soybeans making 44,000JY (open trade), and long Canola making 630.00CD (open trade).
The Metals continued on their trend upward during the past week as strong user demand and inflation buying continued to support the sector. The industrial metals continue to lead the way on ideas that the boom in Asian economies will continue for the foreseeable future. Both Aberration and Relativity are long mini-Silver making $1822.00 (open trade) and $2247.00 (open trade). Relativity is also long the Tocom Platinum with open trade gains of 727,500JY.
IMPORTANT RISK DISCLOSURE
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.
Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") 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 dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.