Attain's Semi-Annual 'Top Fifteen System & CTA Rankings'

July 2, 2007

 

We release our rankings twice a year to give investors a concise summary of the systems (and now CTAs) we believe have the best chance for success moving forward. We are not content to merely show you the best performers this year or a list of the top returns of all time, however; as the best system or advisor for one investor may be anything but best for a second investor. For this reason, our rankings have developed over the years into a comprehensive tool which ranks systems across 8 different statistical categories.

Many investors are in search of a "holy grail" investment which has low risk, high average returns, a multi-year track record, and of course - impressive recent gains, and this eternal search for trading's "holy grail" leads investors to quickly weed through hundreds of trading systems and advisors by asking anyone who will respond to show them their BEST system. But what are you really asking when putting this question to these "experts"? What is BEST supposed to mean, anyway? Best this month, this year? Best for all time? Best risk adjusted return? Best in terms of lowest Drawdowns?

Aren't we being short sighted when asking to see the BEST system or CTA in one category or another? The real question should probably be more along the lines of: "What system or CTA is consistently amongst the top rated across all of the different statistical measures important to this type of investment?"

This is exactly what our rankings have been designed to do: See which trading systems and CTAs are the BEST in each of 8 categories, then see which are consistently among those on each list - and therefore the BEST overall.

We begin by looking at which systems and CTAs are the BEST by returns so far this year. This is unfortunately the measure most investors use to determine what investment is best for them, and the reason the year's hot system or CTA is usually regarded as the BEST. The downside to this analysis, of course, is that it ignores risk. A high return is nice, but at what cost. The BEST performers for the first six months of 2007 were the following:

THE TRADING SYSTEM PERFORMANCE IN THE FOLLOWING TABLES SHOW HYPOTHETICAL MODEL ACCOUNTS COMPILED USING ACTUAL CLIENT BUY AND SELL PRICES. ALL NUMBERS ARE INCLUSIVE OF COMMISSIONS AND THE COST OF THE SYSTEM. PLEASE SEE IMPORTANT RISK DISCLAIMER BELOW.

THE CTA PERFORMANCE IN THE FOLLOWING TABLES SHOW ACTUAL PERFORMANCE AS REPORTED BY EACH CTA. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Top 5 Systems By YTD Return Top 5 CTAs by YTD Return
System YTD Return Init Cap (000S) CTA Program YTD Return Init Cap (000S)
Adaptive Futures Euro Portfolio 29.14% 60 DCM Global Diversified 3X 17.47% 1000
Jaws US 60 27.01% 10 CKP Finance Associates - LOMAX Program 14.21% 100
Compass SP 26.75% 30 Financial Commodity Investments Program 10.57% 50
Tzar Filter ERL 24.88% 30 Chesapeake: Diversified 9.21% 10000
Tzar ES 16.26% 30 BC Capital Management 7.71% 50

 

While systems such as Adaptive and CTAs such as Dekker Capital are among the BEST this year, a simple change to looking at total return over the life of the investment quickly inserts others into the top 5 lists - Compass SP and the Bounce Portfolio for systems, and the venerable Chesapeake and Ace for CTAs. The newer Adaptive and Dekker drop out of the top 5s altogether, due to not enough history to build up a significant track record. The BEST systems by Total Return have been the following:

Top 5 Systems By Total Return Top 5 CTAs by Total Return
System Total Return Init Cap (000S) CTA Program Total Return Init Cap (000S)
Compass SP 252.08% 30 Chesapeake: Diversified 1601.47% 10000
Bounce Index Portfolio 106.65% 25 ACE Investment Strategists 731.88% 50
BounceMOC ERL 78.15% 10 Zenith Resources - Index Option Program 423.05% 50
Bounce Swing ERL 77.77% 10 Dighton Capital USA - Swiss Program 411.07% 100
Tzar ERL 62.18% 30 NDX Capital Management – Shadrach Program 354.10% 100

 

Its easy to play devil's advocate when looking at the total return table and say how it unfairly treats newer systems and CTAs. It admittedly takes a while to build up significant total return numbers, and for that reason looking at the average annualized rate of return (ROR) can make more sense. This measure is more of a "what to expect" than a "what has happened" measure. And sure enough, you will see that the Best by Avg Ann. ROR contains newer systems Adaptive Euro and US. And contains "newer" CTAs (in the CTA world, newer means less than 3 years of history) such as FCI and NDX which have started their careers hot.

Top 5 Systems By Avg Ann RoR Top 5 CTAs by Avg Ann RoR
System Avg Ann RoR Init Cap (000S) CTA Program Avg Ann RoR Init Cap (000S)
Bounce Index Portfolio 42.66% 25 NDX Capital Management Shadrach Program 128.70% 100
Adaptive Futures Euro Portfolio 37.69% 60 Dighton Capital USA - Swiss Program 67.08% 100
Compass SP 34.38% 30 NDX Capital Management Abednego Program 51.30% 100
Adaptive Futures US Portfolio 33.23% 30 Financial Commodity Investments Program 49.19% 50
BounceMOC ERL 31.26% 10 ACE Investment Strategists 48.93% 50

 

But what if we think of BEST not as the one that surpasses all others, but rather the one which is most suitable for me. The question in that case should not be, "What is your BEST system and CTA?" The question should be: "What is MY BEST system and CTA?", or in a more grammatically correct form: "What is the best system and CTA for me?"

To find what system or CTA is the BEST for you, a little soul searching is required. Are you interested in the absolute highest return? Lowest drawdown? Best mixture of the two, perhaps? Or perhaps you think the best system or CTA is the one which has been around the longest. There is surely something to be said for longevity. You will quickly find that different systems and CTAs head many of these lists, showing that finding the BEST is an elusive target indeed.

To begin to filter things down, we must incorporate the riskiness of each system and CTA. Many investors look at Drawdown to get a feeling of the risk involved. But concentrating solely on drawdown is just as bad as looking only at return. For starters, a system could have a very low drawdown because it has only been trading for a short period of time (note the PGA system has only been tracked with actual fills for less than a year) The BEST systems and CTAs for 'lowest' maximum drawdown have been:

Top 5 Systems By Lowest Max DD Top 5 CTAs by Lowest Max DD
System Max DD Init Cap (000S) CTA Program Max DD Init Cap (000S)
PGA Powergrowth 2 8.96% 50 Zenith Resources - Index Option Program 3.12% 50
Tzar Filter ES 11.99% 30 NDX Capital Management Abednego Program 3.60% 100
BounceMOC ERL 13.60% 10 Cervino Capital Management - Diversified Options Strategy 4.47% 50
BounceMOC eMD 15.12% 10 Zenith Resources - Diversified Option Program 4.86% 35
Bounce Swing ERL 16.50% 10 Diamond Capital - Option Trading Program 5.04% 100

 

But as nice as it is too see a low drawdown, low risk doesn't really help if there is also no return. We can always invest in treasury bills if we want zero risk. The next logical step, therefore, is to evaluate which systems have the BEST return per unit of risk. . This is accomplished through the use of several risk adjusted ratios. The first of these is the Sharpe ratio, which measures returns divided by risk (as measured by the standard deviation of returns, or volatility). The formula actually uses the amount of return over the risk free rate. Attain uses 2% as the risk free rate of return in its calculations. The systems with the BEST Sharpe ratios have been:

Top 5 Systems By Sharpe Ratio Top 5 CTAs by Sharpe Ratio
System Sharpe Ratio Init Cap (000S) CTA Program Sharpe Ratio Init Cap (000S)
PGA Powergrowth 2 1.86 50 Zenith Resources - Index Option Program 3.18 50
Tzar Filter ES 1.58 30 Zenith Resources - Diversified Option Program 3.05 35
Bounce Swing ERL 1.2 10 Zephyr Asset Management (Aggressive) 2.99 100
Adaptive Futures US Portfolio 1.08 30 Financial Commodity Investments Program 2.44 50
SeasonalST ES 1.04 20 NDX Capital Management Abednego Program 2.23 100

 

One of the problems with using the Sharpe ratio is that it punishes trading systems for having a high upside volatility profile. For example, the Compass system had a one month gain of +74% in 2002, which caused the volatility reading for the system to skyrocket. But it can be argued that upside volatility is of no concern, as that means large positive monthly gains in the distribution of returns. Does it mean an investment is more risky if it has a huge monthly GAIN? Usually not - we think a huge monthly loss is much more important when measuring risk. There is a risk measure which eliminates the upside volatility skew from the Sharpe ratio by using the volatility of negative returns only. This measure is called the Sortino ratio. The BEST systems and CTAs by Sortino ratio have been:

Top 5 Systems By Sortino Ratio Top 5 CTAs by Sortino Ratio
System Sortino Ratio Init Cap (000S) CTA Program Sortino Ratio Init Cap (000S)
PGA Powergrowth 2 10.5 50 NDX Capital Management – Abednego Program 41.0 100
Tzar Filter ES 8.97 30 Zenith Resources - Index Option Program 21.9 50
Adaptive Futures US Portfolio 5.48 30 Financial Commodity Investments Program 18.0 50
Adaptive Futures Euro Portfolio 3.69 50 NDX Capital Management – Shadrach Program 16.5 100
BounceMOC ERL 2.84 10 Zephyr Asset Management (Aggressive) 13.2 100

 

The Sharpe and Sortino ratios have a flaw, however, in that they view the volatility of returns as the main ingredient of risk. This speaks nothing of what sort of drawdown had to be encountered to get the return. As many trading system investors can attest to, it is the drawdown period which represent the most risky part of the investment, not the volatility of returns. The Sterling ratio measures returns divided by risk (as measured by drawdown). The BEST systems and CTAs by Sterling Ratio have been:

Top 5 Systems By Sterling Ratio Top 5 CTAs by Sterling Ratio
System Sterling Ratio Init Cap (000S) CTA Program Sterling Ratio Init Cap (000S)
Bounce Index Portfolio 1.94 25 NDX Capital Management Shadrach Program 5.77 100
PGA Powergrowth 2 1.85 50 NDX Capital Management Abednego Program 4.35 100
BounceMOC ERL 1.64 10 PEG FIT FX Program 2.06 5
Bounce Swing ERL 1.45 10 Zenith Resources - Index Option Program 1.90 50
Adaptive Futures US Portfolio 1.2 30 Financial Commodity Investments Program 1.87 50

 

One last piece if information it is important to take into consideration is the length of track record. The above tables have looked at systems and CTAs with at least four months of actual trading data, but measures such as the Sharpe ratio are usually computed on at least 3 years of data. The shorter the length of a track period, the greater the margin of error in the statistics. Thus a system such as PGA or Adaptive, which look very nice atop many of the BEST tables above, could have a larger margin of error given their relatively short track records. The BEST systems and CTAs by length of track record are:

Top 5 Systems By Length of Track Record Top 5 CTAs by Length of Track Record
System Track Record (months) Init Cap (000S) CTA Program Track Record (months) Init Cap (000S)
Compass SP 88 30 Chesapeake: Diversified 232 10000
Mesa Notes 48 30 CCM - Millennium Program 113 2000
Tzar ES 46 30 MCM 101 3000
Jaws Narrowneck 45 35 BC Capital Management 99 50
Tzar NQ 40 30 Zenith Resources - Index Option Program 90 50

 

So what systems and CTAs are the best overall? It again depends on what you are looking for, but the overall picture does have some clues. Our rankings define the BEST system and CTA mathematically by using a simple formula based on their ranking among all 80 systems we track with actual customer fills and 25 CTAs we recommend. For each of the above eight categories, we ranked each system and CTA 1 through 80 (25), with a BEST in category equaling 1 point on down to a worst ranking of 80 (25). The sum of all scores was computed to get the following standings for the Top Fifteen BEST systems and CTAs at Attain as of the midpoint of 2007.

Best Overall? Attain's Top Fifteen

Top 15 Trading Systems Top 15 CTAs
Trading System Avg Ann RoR Max DD Min Inv (000s) CTA Program Avg Ann RoR Max DD Min Inv (000s)
BounceMOC ERL 31.26% 13.60% 10 Financial Commodity Investments Program 48.28% 16.26% 50
Bounce Index 42.66% 17.08% 25 Zenith Resources - Index Option Program 24.79% 3.12% 50
Bounce Swing ERL 31.11% 16.50% 10 NDX Capital Management – Shadrach Program 124.9% 21.5% 100
Tzar Filter ES 22.04% 11.99% 30 Dighton Capital USA - Swiss Program 70.16% 35.29% 100
SeasonalST ES 18.86% 20.09% 20 ACE Investment Strategists 48.47% 23.71% 50
Bounce Swing EMD 19.75% 16.70% 10 CKP Finance Associates - LOMAX Program 42.77% 31.79% 100
Tzar Filter ERL 31.10% 26.06% 30 Zephyr Asset Management (Aggressive) 29.7% 6.87% 100
Compass SP 34.38% 82.14% 30 NDX Capital Management – Abednego Program 49.8% 3.6% 100
BounceMOC EMD 15.42% 15.12% 10 DCM Global Diversified 3X 38.22% 23.98% 1000
Tzar ES 13.38% 32.93% 30 Chesapeake: Diversified 18.04% 20.58% 10000
RT-Viper YM 16.49% 9.99% 10 Raithel Investments - Target Volatility Trading Program 19.37% 14.01% 100
Jaws US 60 US 13.41% 44.81% 10 PFG FIT FX Program 34.8% 10.8% 5
OPXP v2 ERL 15.08% 9.74% 10 Zephyr Asset Management (Moderate) 21.83% 9.59% 50
Adaptive Futures US Portfolio 33.23% 23.46% 30 BC Capital Management 17.55% 42.32% 50
PGA PowerGrowth 2 27.96% 8.96% 50 Diamond Capital - Option Trading Program 12.94% 5.04% 100

 

Important Risk Disclosure

The % returns for trading systems above are hypothetical in that they represent returns in a model account. The model account rises or falls by the exact single contract profit and loss achieved by clients trading actual money pursuant to the listed system's trading signals on the appropriate dates, or if no actual client profit or loss available - by the hypothetical single contract profit and loss of trades generated by the system's trading signals over the test period. The hypothetical model account begins with the initial capital level listed, and is reset to that amount each month. The % returns reflect inclusion of commissions, fees, and the cost of the system. Commission and fee cost = # of monthly trades * $50.00 ($30 for eminis). The monthly cost of the system is subtracted from the net profit/loss prior to calculating the % return. For systems with one time purchase costs, the monthly cost is calculated by dividing the purchase cost by the number of months in the reporting period.

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.

THESE PERFORMANCE TABLES AND RESULTS ARE HYPOTHETICAL IN NATURE AND DO NOT REPRESENT TRADING IN ACTUAL ACCOUNTS.

The % returns for CTAs above show actual performance as reported by each CTA. Past performance is not necessarily indicative of future results.

Managed commodity accounts can subject to substantial charges for management and advisory fees. The above numbers 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.

The regulations of the Commodity Futures Trading Commission (CFTC) require that prospective clients of a 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 Commodity Trading Advisor (CTA). This document is readily accessible at Attain's website.

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.

Feature   |   Week In Review   |   Chart of the Week   |  

Chart of the Week

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***Overview***

The US Stock Market had a slow month in June as investors decided to take profits off the table ahead of what could be two very slow months of trading in July and August. SP 500 futures pulled back -2.08% for the month, breaking a three month winning streak. Dow futures were also in the red losing -1.84% while NASDAQ futures were unchanged for the month. In the small caps SP Midcap 400 futures lost – 2.54% and Russell 2000 futures were down -1.64%.

Commodities continue to rock and roll as worldwide consumption continues to increase. Grains have been the most volatile sector due to drought conditions in the US and other growing area throughout the world. Last month Soybean futures climbed over 5.00% while Wheat futures rocketed +12.06% higher. Corn futures, on the other hand, fell -8.84% due to more farmers growing corn to satisfy ethanol demand. As corn prices fell so did the price of meat with Lean Hog futures losing -4.46% and Live Cattle futures dropping -1.31%.

Elsewhere, energy trading remains very tenuous as political tensions mount. Crude futures were up +9.28% last month due to increased violence in the Middle East and the nationalization of oil fields in Venezuela. Heating Oil futures climbed +8.03% and RBOB Gasoline futures were up +3.27%. Natural Gas futures actually moved lower for the month falling -1.59% due mostly to the lack of hurricane activity in the Atlantic.

Other markets in the news in June include Cotton which gained +11.54%, Gold which fell -2.37%, Silver which was down -8.28%, Palladium which fell -1.27% and US bond futures which dropped -1.26%.

***Day/Swing Trading***

June of 2007 will go down in the books as a great month for both day and swing trading systems. There have been other months when either day or swing systems perform as well as they did in June, but it was very nice to see both perform so well at the same time. Volatility was to thank, as it spiked up near levels seen in late February/early March to give day trading systems like Compass SP several opportunities to shine. On the swing side, the sharp declines followed by strong recoveries gave systems like Adaptive Euro and Tzar eRL the opportunity to flip from short to long and vice versa several times throughout the month.

The top performing system across both day and swing trading systems was Adaptive Euro which finished with profits of +$28,601.78 for the month. Nearly all of the system’s profits for the month came on long trades-but it was spread across several mkts from Dax to FTSE to Ibex and Cac 40. The program is now deep in the money for the year- congrats to the investors who were able to withstand the drawdown in the first quarter. The Tzar suite of systems really came alive in June to build on profits made in May. Tzar eRL paved the way for the other two markets with profits of +$8,404.08 on four trades while Tzar NQ was up +$1,858 and Tzar ES -$180.

The Ultramini systems were another to find success with the trading conditions, making +$3,474 in the eMD and +$1,277.50 in the YM. Jaws US 60 has been a consistent performer this year and tacked on another +$1,393.75 in June. Adaptive US wasn’t nearly as profitable as its Euro sister system but still managed to make +$750.30. SeasonalST ES and eRL were pretty slow in June and lost -$835 and -$1,260 respectively. Spartan ES has two trades-one long and one short for a loss of -$2,012.50 for the month. Finally, Mesa Notes struggled on its long position only to reverse short just before bond markets recovered making for a loss of -$2,240.62 for the month.

Moving on the day trading systems, Compass SP was in a league of its own with profits of +$10,493.97 for the month. The June performance was the 3rd best month in its eight year track record starting in 2000. Elsewhere, Waugh eRL made a name for itself last month with profits of +$3,057. While these programs were hard at work on US markets, Rayo Plus Dax was busy making +$1,045.66 on the German stock futures. Impetus eRL had a respectable showing as well with profits of +$720 on just six trades for the month.

Elsewhere, OPXP eRL traded about three times a week on average and lost -$547. BetaCon 4/1 ESX lost -$662.13 on eleven trades. Phi Plus Dax was extremely active with nineteen trades but lost -$1,160.

***CTA Trading***

June was another strong month for Attain recommended CTAs, with the majority posting gains. Highlights included our own Attain Portfolio Advisors with a gain of 5.6% to achieve new all time highs, a 3.3% gain for Diamond Capital to go back positive on the year, and a 12% gain for Dighton Capital to end its 3 month drawdown.

The continuation of major global trends across wide range of commodities benefitted non option selling CTAs (cofee, sugar and cotton for Dighton, Soybeans and Stock Indices for Attain), while a well contained range in the stock indices lead to profitable opportunities for option sellers.

On the losing side, the Phoenix Energy program suffered from several spikes higher due to Nigerian Oil worker strikes which in turn had no follow through. While the CKP Lomax program suffered losses on the last day of the month as the Corn market went against them due to the record plantings.

Log in to Attain here: http://www.attainaccess.com/cta to see June performance estimates for the majority of our recommended CTAs. CTA investors have traditionally been forced to wait several weeks before having access to month end performance numbers despite the daily transparency of managed futures accounts. Attain would liek to change that, and starting this month, we have begun reporting early estimates on our site for a large majority of the managers we work with.

***Long Term***

Activity for Long Term systems during June saw a few new positions put on, whiethere were few exits. Market worries on world economies and geopolitical events continue to keep the financial sector volatile and choppy. The livestock and soft commodities sectors saw more active movement on supply/demand events. Energy markets continued to find strength from supply disruptions in the gasoline market, not to mention strong underlying global demand that has not waned even with the alternative fuel boom.

The upside momentum from May carried over into mid-June in the grain markets as corn and wheat scored new multi-year highs with soybeans following moving to levels not seen since 2004. But as June closed out, the whole scenario changed with the Quarterly planting release by the USDA showing the largest planted corn crop in the modern era, although that gain in corn acres sliced into the soybean acres substantially and should boost prices in the soy sector especially with soy products leading the way on ideas that world supply tightness will be a real concern as the year moves on. Weather turmoil has subsided, although any extended hot and dry period during corn pollination time at the end of July could prove costly for yields - setting the stage for more upside volatility. The oversupply catch phrase for items such as cotton, sugar, and coffee seems to be gone now as these commodities added to gains from May after multi-month lows. Aberration is long Bean oil with a gain of +$2178.00 (open trade), Long KC wheat with a gain of +$1437.50 (open trade) and short sugar with a loss of -$123.20 (open trade).

Interest rate prices spent the first half of June skidding to new 13-month lows (rates higher) sparked by worries of global inflation, but found late month support on weaker than expected economic data. The sector also found support from fears the U.S. housing sector will continue to drag on the economy, although the sub-prime mortgage fiasco could still unnerve the market as foreclosures continue to climb. Long term systems remain fairly quiet in the sector due to a lack of a strong long-term trend, but there are a few current positions. Aberration is currently short the Euro-bund currently showing +$620.00 (open trade) gain and short TYU sporting a gain of $875.00 (open trade).

The Euro dominance over the currency sector seemed to gain back its momentum in June as worries of rising inflation subsided. The Japanese Yen also showed signs that a decent recovery may be on the horizon as it seems to be carving out a meaningful bottom on news of an improving economic outlook in Japan. Aberration is short the Sept. SF losing - $1137.00 (open trade).

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.

Feature   |   Week In Review   |   Chart of the Week   |