Products

What are Futures?

Futures are contractual agreements made between two parties through a regulated futures exchange. The parties agree to buy or sell an asset - livestock, a foreign currency, or some other item - at a certain time in the future at a mutually agreed upon price. Each futures contract specifies the quantity and quality of the item, expiration month, the time of delivery and virtually all the details of the transaction except price, which the two parties negotiate based on current market conditions. Some futures contracts call for the actual, physical delivery of the underlying commodity or financial instrument at contract termination. Others simply call for a cash settlement at contract termination. Generally, however, market participants do not hold their futures contracts until termination but rather offset futures contracts they have bought ("gone long") by a subsequent sale; or, offset futures contracts they have sold ("gone short") by a subsequent purchase.

What are Commodities Trading Advisors?

A Commodity Trading Advisor or CTA is an US financial regulatory term for an individual or organization to provide advice and services related to trading in futures contracts to manage a fund. They are responsible for the trading within managed futures accounts that could range from few millions to several billions. The CTA industry currently manages a total of $330bn and there as as many as 5000 registered CTAs. CTA may also be regarded as investment advisors for hedge funds and private funds including mutual funds and exchange-traded funds in certain cases. CTAs are generally regulated by the United States federal government through registration with the Commodity Futures Trading Commission (CFTC) and membership of the National Futures Association. There are several classifications of CTAs that adopt various types of trading and portfolio strategies to manage funds. Some focuses on Market Timing others concentrate mostly on trends and shifts in value. These convex strategies sells the markets as they fall and buys the market as they rise is predominantly trend following by nature.

Ranking the Investment Managers!

One of the key characteristics of finding good managers is knowing how their historical performance can provide a reflection of their future performance given the strategies they use and the participation level of those strategies among other managers. Finding a set of good managers involves looking at the balance of historical Maximum Drawdown (MaxDD), Sharpe Ratio, and the smoothness of the P&L and Equity Curve. From an investors point of view the fear factor lies in the probability of their managers adopting a strategy that is less likely to work in the future than it is today and the negative monthly return surprise shocks. For this very reason we have applied Big Data Analysis to performs predictive ranking using our proprietary model that identified the list of 8 managers given by their strategies from a universe of 1000 managers. If we relax some of the parametric conditions the list would be around 20 but at the cost of higher volatility or frequency of negative return shocks.

2012 2013 2014 2015 2016* MaxDD
Non Directional 36.71% 4.57% 10.41% 16.27% 11.70% -8.02%
Quantitative Multi-Strategy 28.38% 14.01% 6.70% 16.38% 5.01% -11.31%
Algorithmic 57.06% 8.32% 11.69% 8.01% 0.76% -6.50%
Relative Value 8.97% 7.07% 14.53% 2.48% 0.18% -2.03%
HFT 29.75% 17.31% 20.24% 23.04% 2.42% -3.80%
Price Inefficiency 5.66% 7.99% 24.80% 22.78% 4.37% -2.43%
Global Macro 28.20% 19.76% 22.46% 24.39% 6.11% -4.04%
Spread Trading 12.40% 37.63% 32.31% 24.71% 3.59% -18.22%

* Data till April 2016

Managers Relative Performance

The 8 selected managers return factor on cumulative basis are put next to each other for comparison

It is noticeable form the Annualised Risk/Return that all the managers with their diverse strategies offer a Sharpe Ratio greater than 1.

Strategies And Their Significance

HFT

An E-mini futures contract that can be traded electronically on the Chicago Mercantile Exchange and is based on the S&P 500 index. As opposed to normal S&P futures contracts, which have a point value of $250, the e-mini contract has a point value of $50. Short for Electronic Mini S&P 500.

Spread Trading

Unlike what is available to the retail trading community, our selected platforms and FCM can provide access to products like exchange traded spreads for e.g. buying the Sept Crude Contract and selling the November Crude Contract which is done as one single trade in our platforms.

Algorithmic

The minimum amount of money needed on the account to trade a Futures Contract. This differs from products to products and a relatively based on value and volatility. There overnight margin is relatively higher than what is required during the product regular trading hour session.

Multi-Strategy

The minimum amount of money needed on the account to trade a Futures Contract. This differs from products to products and a relatively based on value and volatility. There overnight margin is relatively higher than what is required during the product regular trading hour session.