For the month of April Managed Futures as a whole continued to lose ground. The Barclay CTA index ended at a -.65% for the month of April, leaving the index at a -2.48% YTD. The Agricultural Traders Index managed to have a positive return of .32% while the Diversified Traders index was hit hardest with a -1.43% for the month, YTD the index sits at -4.56%. The negative return does not come as a surprise to me after seeing a positive year last year. Trend followers know there is a good chance of a drawdown after a stellar period of returns. The question investors are now asking is when will we see the drawdown end and the performance begin. Jim Anderson of Clarke Capital Mgmt attributes much of the drawdown to market uncertainty, “we are convinced that the market has, for the time being, become event-driven. As we all know, the markets loathe uncertainty. And this has become the most uncertain of times in recent memory. As such, it may be awhile before the markets can parse out what represents "normalcy" again. It may very well be that this will be mostly determined by the direction the economy takes.” When it come to Trend following one thing I have learned over the years is trying to time the entrance and the exit to avoid the drawdowns and participate in the profits can sometimes be detrimental. While these drawdowns may make some investors sit on the side lines, there are others who view it as a great time to enter. Richard Seapy of Bayside Pacific Advisors says drawdowns can provide a unique opportunity for investors, “when you are considering a trend following system, it is important to consider where the equity curve is at. If it is at highs, this usually indicates that there are a higher number of open positions and that those positions have experienced a high level of profits or open equity. During a drawdown the number of open positions and open equity is typically much less thereby giving a new investor a great opportunity to participate in the next set of trends that develop.”
Past performance is not indicative of future results.
*There are currently 494 programs included in the calculation of the Barclay CTA Index for the year 2009, which is unweighted and rebalanced at the beginning of each year. To qualify for inclusion in the CTA Index, an advisor must have four years of prior performance history.
**Performance includes 81.01% of reporting CTA's as of 5-19-09