20 MAR

2017

Absolute Return, Topics

Timing an investment in CTAs : Buying performance or buying drawdowns

CTAs generally use quantitative models to identify trends in financial markets. Once identified, long or short positions are taken to benefit from the continuation of the movement.

With this ability to profit from both upside and downside movements across a wide range of asset classes, CTAs have been providing steady positive returns since they were first developed over 30 years ago. In the chart below, we can see how CTAs (as represented by the Barclay Systematic Traders Index) have delivered true absolute performance over the past 30 years – including in the face of the several crises that investors have faced.

Such characteristics are often deemed very attractive by investors, who, once convinced of the advantages of holding a CTA in their portfolio, are often left with the challenge of the best timing to trigger their investment.

To answer this matter, we are sharing a few insights in this paper.

Is it better to invest when recent performance has been good? Or should you be more contrarian and enter during a setback?

Does it really matter if your investment horizon is over three years, as frequently recommended by fund managers?

Download the article