The 2020 CTA Challenge – April Newsletter

2020 CTA Challenge – Initial Rankings Are Here!

Initial year-to-date rankings for 2020 are here and AG Capital is off to an early lead, as of the end of March. AG performed well in the past 2 years of the CTA Challenge, finishing in the top 10 for both 2018 and 2019. Starting 2020 in first place after an extremely strong Q1 is a testament to their diligence in finding opportunity in non-traditional markets (like Palladium futures). Rounding out the top 10 are Revolution Capital Management, Persistent Capital Management, Red Rock Capital and Orion Capital Advisors. All 5 programs have completely different styles and trading disciplines…making for a very diversified group of top performers. See below for complete list.


The Bulls & Bears Arrive Full Force In March

March 2020 – What. A. Month.

I had not seen that type of market pain, excitement and volatility over my entire career. I started in financial services in 2002 at the bottom of the dot com bubble burst, post 9/11. Climbing out of that investment slump environment was tough for many. Just when portfolios were achieving statuses that felt somewhat back to normal, the housing market crash of 2008-09 came and we witnessed the entirety of the Great Recession. It took months, or even years, for these drops in the stock market to subside, after finding a bottom. It took additional years to recover to previous levels and more years to get back to the markers of the long-term trend lines. Even though investors knew the pain of long-term market declines and economic recessions, we hadn’t seen the size and style of drops that March 2020 brought. The sheer velocity of the moves had a sharpness that hadn’t been seen since the Great Depression of the 1920s and 1930s. Unless you are over 100 years old, you had never witnessed that type of stock market volatility either.

Some numbers on the Dow Jones Industrial Average (DJIA) index for March 2020:

25,409.36 = Feb 28 close

27,102.34 = March mid-month high

18,213.65 = March mid-month low

21,917.16 = March 31 close

March 2020 monthly overall performance for the DJIA was a loss of -13.74%. The change from the intra-month high to the intra-month low was a loss of -32.80%.

I’ll touch on the CBOE Volatility Index (VIX) real quick. It closed February 28 at 40.11 and closed March 31 at 53.54…with a March intra-month high of 85.47 and intra-month low of 24.93. Talk about big swings!

The DJIA experienced a -10.07% loss in February coming into March, adding to the already tough environment. March 2020 officially put the DJIA in a true Bear market after crossing the -20% line from previous high.

The DJIA recovered a little in April 2020 and so far is up 6.92%, as of the close on April 8…coming after a -23.47% loss in Q1 for the index…and leaving us at -18.18% year to date. April has seen some big swings already in the DJIA, but the key here is the 20% Bear market threshold was erased and the DJIA has moved up so quickly that Bull market enthusiasts are ringing their bells. I don’t buy it, because we still have a long way to go with the fallout from the COVID-19 global actions and I think the DJIA has a tough, negative road ahead. Whatever your stance, Bull or Bear, I think the majority of people with US stock market exposure felt a lot of investor pain in March and throughout the entire first quarter of 2020 and are once again looking for diversification outside of the stock market.

Now for some good news. What if I told you all top 5 programs in the CTA Challenge achieved double digit positive returns during Q1 of 2020? What if I told you their performance moves were non-correlated to the DJIA or other stock market indices last quarter and basically since their program inception? What if I told you these programs have lower actual historical maximum peak-to-valley % draw down losses than that of the DJIA or S&P (both dropped over 50% in 2008-09). What if I told you diversification works when you don’t need it and really works when you do need it? Would you believe me? I hope so. It is based on facts and math; the numbers don’t lie.

And, as always, past performance is not indicative of future results.


Investors Who Want To Know More

To learn more about these CTA Challenge programs, or others that are performing well in this current environment, please contact Coquest by Clicking Here or calling 1-214-580-4220.


The Case for Managed Futures

Managed Futures investment strategies, traded by CTAs, as well as Global Macro investment strategies, prove themselves consistently again and again to be non-correlated with the S&P 500 Index and the general stock market. These investments do not necessarily go up when the stock market goes down (negatively correlated) nor do they necessarily go up when the stock market goes up (positively correlated). Managed Futures investments simply behave completely different and are based on the skill (and sometimes luck) of the trading program and its architects more so than the direction of the economy or the stock market. Investments in Managed Futures programs, like anything, should be done with careful consideration. And, as always, past performance is not indicative of future results.


The CTA Challenge at a Glance

Commodity Trading Advisors (CTAs) are investment managers who trade on-exchange futures contracts. Their products, available for investment to qualified individuals, tend to produce returns that are non-correlated with the stock and bond markets. The level of skill required to trade in the futures markets is considered more difficult than most other capital markets due to the inherent leverage of the traded contracts as well as the ability to go long or short at any time. Futures contracts are available for thousands of global commodity and financial instruments, from Lean Hogs, Wheat, Gold, Crude Oil and Coffee to the S&P 500 index, EUR/JPY cross rate, US 10Y T-Notes, the German Dax index and even VIX or Bitcoin. This allows CTAs to participate in the prices moves of a vast number of products controlled by supply and demand as well as geopolitical decisions…but rarely affected by the decisions made in a corporate board room as is the case with each company in the stock market.

The unpredictable nature of futures market price moves, in both direction and size, require CTAs to employ hefty risk controls if they want to protect customers from large losses in their investment accounts. Because of this additional layer of complexity, we cannot simply focus on performance returns when evaluating a CTA investment program. In the CTA Challenge, we take a risk-adjusted approach to analyzing and ranking CTA programs to ensure we are evaluating performance and risk numbers achieved as well as performance and risk amounts exposed. We are evaluating “what actually happened” while also looking at “what could have happened”. See below for the most recent Top 5 ranked programs year-to-date in the CTA Challenge.


2020 CTA Challenge:

Top 5 Ranking Through The End Of March

#1: AG Capital Investments LLC / Discretionary Global Macro Program

#2: Revolution Capital Management LLC / Alpha Program *QEP*

#3: Persistent Capital Management / Global Diversified Program *QEP*

#4: Red Rock Capital LLC / Commodity Long-Short Program

#5: Orion Capital Advisors Inc / Beta Opportunity Strategy

See the full current rankings here.

CTAs interested in participating, or investors interested in learning more about CTAs and Managed Futures investment strategies, should contact Coquest and the CTA Challenge by Clicking Here.


Featured Sponsor

Started in 1919 by Mr. D. Howard Doane, Doane Advisory Services was built with the vision of creating a more efficient, productive agriculture industry. Acquired by Farm Journal in 2015, Doane Advisory Services is a market leader for agricultural economic information and outlook. Doane’s economists combine Farm Journal’s deep farm-data content with its proven models and analysis – which distinguish Doane as the only advisory services with direct contact with America’s farmers and ranchers.


Featured CTA

Revolution Capital Management LLC, a Denver-based alternative investment money manager, strives to provide diversification of returns within the managed futures space. Recognizing that the majority of commodity trading advisors (CTAs) pursue some type of trend-following strategy, Revolution’s goal is to offer complementary products with varying degrees of target correlations to trend-exploiting strategies.  By maintaining a focus on developing programs with low correlations to other offerings, Revolution can potentially provide significant benefits to the risk-adjusted characteristics of most managed-futures portfolios.


Upcoming Events – Mark Your Calendars!

Talking Hedge – Toronto
June 10-11, 2020
The Westin Harbour Castle, Toronto, Ontario, Canada

TEXPERS – 2020 Annual Conference
August 15-18, 2020
Grand Hyatt, San Antonio, TX

MFA Forum 2020
September 9, 2020
Four Seasons Hotel, Chicago, IL

Coquest Annual Soiree
September 9, 2020
TBD, Chicago, IL


CTA Challenge Sponsors