Newsletter: Analyzing MF Drawdown, Recovery, & Run-Up Cycles

Our Monday night newsletter is up at: http://bit.ly/cvOBAf.

Of particular interest given the current environment of systematic multi-market managers making new highs while option selling managers struggle with drawdowns for the first time since 2008 is the following paragraph:

It is interesting to note the contrast between the long volatility programs with their long drawdown/short recovery profile, and option selling programs with their short volatility profile which results in a short drawdown/long recovery type cycle. We ran the same analysis on the popular option selling FCI program, and found that their average drawdown period lasted just 3.5 months, while their average recovery lasted 9 months (or about 3 times the DD duration). Contrast that with Clarke Capital’s Worldwide program seeing an average DD duration of 19 months and average recovery of 7 months (about 1/3 of the DD time) and the differences between these two strategies really becomes clear.

And of course, there are some interesting graphs as always (Past Performance is Not Necessarily Indicative of Future Results)










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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (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 CTA.