A Generational Low for Managed Futures

Our latest newsletter is out… and we’re talking Wilson Phillips, wrecked Ferraris, smiley faces, and the worst drawdown managed futures has seen in 20+ years.

How bad is this Managed Futures Malaise that we’re talking rain dances and Wilson Philips songs? Pretty bad. The main CTA indices are all at 3.5 year lows and sitting on their worst drawdown levels in the past 15 years – at 28 months and -12% from their past all time highs.  And with the year to date numbers negative through August (albeit a small amount),  there’s the very real possibility of managed futures postings its 4th losing year out of the past 5 in 2013. What’s more – a comparison of the 10 years prior to 2009 and the period from March 2009 until now shows the asset class at levels not seen decades, in terms of the amount and duration of the losses, reminding us of the ‘generational low’ terminology used by the stock folks circa 2009).

Managed Futures Indices Drawdown_1
(Disclaimer: Past performance is not necessarily indicative of future results)

Average of Managed Futures Indices Drawdown
(Disclaimer: Past performance is not necessarily indicative of future results)

But as bad as it is, it isn’t bad at all when compared to other asset classes worst periods. And indeed we are starting to see is a shift in attitude from those interested in managed futures exposure  – from invest in managed futures because of the crisis period performance and diversification value, etc. – to… this is a generational buy in managed futures akin to US stocks in 2009. The new attitude is buy into managed futures not just because it will help your portfolio when the s^&% hits the fan, but because it isn’t likely to get much worse from here (although it could). It’s now a contrarian, dogs of the Dow, buy the beaten down asset class play.

As for Wilson Philips, the [abridged] lyrics seems like they were written specifically by or for an investor in a drawdown:

Just Hold On

“I know that there is pain
But you hold on for one more day and
Break free, break from the chains

Don’t you know things can change
Things’ll go your way
If you hold on for one more day yeah
If you hold on..”

Read the full newsletter to see just how bad it is – how the 10 largest CTAs have fared since 2009, the five reasons some people think managed futures is broken, the comparison of managed futures ‘worst’ period with stocks, bonds, real estate, and Gold; and more.

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