What do you consider to be the most essential characteristic of an alternative investment? Non-correlation to stocks? Risk Control? Liquidity? To different investors, each of these attributes are prioritized differently. It’s what makes alternative investments so appealing and so confusing at the same time. Having all the research in the world doesn’t count for much if you don’t know which metrics are important to your risk/reward profile (if you even know what your risk/reward profile is).
In the Global Macro / Managed Futures / Commodity Trading Advisor (CTAs) space, there are hundreds of programs to choose from. Some have a trend-following systematic approach; some have a Discretionary AG approach; some are newer managers; some are considered long standing stalwarts.
It’s simply too complicated for most investors, be they individuals or small institutions or family offices, to take on. While there are countless ways to analyze and break down the managers in this space, every couple of months we use our proprietary rankings to display the top managers across 9 different categories we believe are meaningful for investors. (including our top 15 list for those that want the most “well rounded” program) in our Managed Futures Rankings.
See 9 separate rankings including:
- Top managers over $100 mm AUM
- Top managers under $100 mm AUM
- Top managers for risk control
- Top managers for reward only
- Top managers for risk adjusted performance
- Top managers with min. investment less than 200k
- Programs You Should Know
- Managed Futures Mutual Funds
- The Top 15 Overall
This time around, we have made some new additions to the rankings, including one new category – a Managed Futures Mutual Fund section; although the number of them reporting to investment databases outside of Morningstar aren’t quite where we’d like to see them yet. Second, our metrics now include the Omega ratio which has been shown in our research to mean more to a program’s ability to display persistence in returns than a more simplistic measure like the Sharpe ratio. And third, we have linked each program to its profile on our new database. Each profile provides further statistics and charts that allow you to see what the investment might look like in a portfolio.
Why does it all matter? Well, our rankings are designed to identify those programs which can provide better risk-adjusted returns over a 3 to 5 year period. Speaking of which, here’s the snapshot of a hypothetical, equal weighted portfolio of the Top 15 as displayed in our February 2014 rankings, and how it has performed against the benchmark BarclayHedge CTA Index over the past 3 years. That’s been one tough period for managed futures, overall, but we’re happy to see the top ranked ‘portfolio’ provide a higher total return and lower volatility and drawdowns over the period, resulting in much improved Sharpe and MAR ratios.
Download the Rankings and then schedule a call with an RCM Alternatives specialist to go through any questions you may have for us beyond the numbers.
COMPOSITE HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY MULTI-ADVISOR MANAGED ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE A COMPOSITE PERFORMANCE RECORD SIMILAR TO THAT SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.
ONE OF THE LIMITATIONS OF A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD IS THAT DECISIONS RELATING TO THE SELECTION OF TRADING ADVISORS AND THE ALLOCATION OF ASSETS AMONG THOSE ADVISORS WERE MADE WITH THE BENEFIT OF HINDSIGHT BASED UPON THE HISTORICAL RATES OF RETURN OF THE SELECTED TRADING ADVISORS. THEREFORE, COMPOSITE PERFORMANCE RECORDS INVARIABLY SHOW POSITIVE RATES OF RETURN. ANOTHER INHERENT LIMITATION ON THESE RESULTS IS THAT THE ALLOCATION DECISIONS REFLECTED IN THE PERFORMANCE RECORD WERE NOT MADE UNDER ACTUAL MARKET CONDITIONS AND, THEREFORE, CANNOT COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FURTHERMORE, THE COMPOSITE PERFORMANCE RECORD MAY BE DISTORTED BECAUSE THE ALLOCATION OF ASSETS CHANGES FROM TIME TO TIME AND THESE ADJUSTMENTS ARE NOT REFLECTED IN THE COMPOSITE.
THESE PERFORMANCE TABLES AND RESULTS ARE HYPOTHETICAL IN NATURE AND DO NOT REPRESENT TRADING IN ACTUAL ACCOUNTS.