What’s the BEST managed futures program? – ValueWalk Premium
managed futures

What’s the BEST managed futures program?

What’s the BEST managed futures program? That’s a tricky one. Do you mean: Best last year? Best for all time? Best risk-adjusted return? Best in terms of lowest drawdowns?

Q3 2019 hedge fund letters, conferences and more

We can all see which programs logged the highest return last year, or has the most assets, or sports the largest total lifetime return. But investors care about more than just returns. There’s risk and exposure and pedigree and all the rest to consider, making the question of rankings and who’s the best a truly investor-specific endeavor. The real question should be, who’s the best for me?

RCM Alternatives has been applying its due diligence on managers and programs in the space for more than a decade. For six years in a row, we’ve been selected as the best introducing broker in the Managed Futures space, in part because we’ve dedicated extensive resources to analyzing and testing a rankings system that would best reflect what we believe to be the important metrics for measuring skill in this investment space.

Our rankings start by filtering the BarclayHedge database to a smaller subset of managers which have at least 36 months of track record, and are investable (no pro-forma or prop account records, for example; or currency traders using Turkish banks).

We then measure the programs across different metrics related to return (like compound RoR, Omega ratios), risk (like lowest 3yr return, average drawdown), correlation levels, and length of track record. Next, we time-weight the numerous statistics, evaluating each metric across 1, 3, 5, and 10-year time periods, in addition to the full length of the program since its inception. This focus on varying time frames ensures that great returns far back in a program’s track record don’t skew their ranking, and, likewise, that newer programs that haven’t “lived through tough times” don’t dominate the rankings.

It is important to remember that these rankings are backwards looking, being generated off the monthly returns and other profile information of hundreds of CTA programs, and, as such, are not meant to necessarily predict who will be winning tomorrow. As the old saying goes – past performance (and risk, and correlation, and all the rest) is not necessarily indicative of future results.

managed futures

Top Ranked – Large Managers

More than $100 Million in Assets Under Management

managed futures

Starting at the top – managers with more than $100 million in Assets Under Management. Over $100 million in assets usually indicates: being operationally sound, successful, and maintaining pedigree to remove non-performance related risks.

Though the access to these managers isn’t always that easy, with minimums sometimes reaching into the (multi)millions, the stats often speak for themselves.

Using our overall ratings, here are the top-rated CTAs with more than $100 million in assets under management:

And if you’re looking for more, check out our infographic that lays out the top 100 managed futures programs overall.

Top Ranked – Small Managers

Less than $100 Million in Assets Under Management

managed futures

We won’t make you hunt for these diamonds in the rough.

These are the five highest-ranked programs per our ranking formula, which have less than $100 million under management.

Bigger doesn’t always equal better, especially in the CTA industry. Managers that hold less money under management are able to access smaller, less-liquid markets, with lower correlation, and can nimbly make moves against market changes (though that doesn’t guarantee better performance – losses are always a possibility).

The key is finding the hidden treasure programs that can operate as well as the big guys, just on a smaller scale.

Top Ranked – Risk Control

Highest Rank Across Risk Metrics

managed futures

When managing risk = reward.

Returns are only one piece of the puzzle. If you’re an investor, solely focused on returns, and not taking other factors into consideration (cough, risk, cough) you’re not getting the full picture on how that fund achieved said return.

Beyond the basics; sophisticated investors want to know the program isn’t just blindly pursuing profits and that risk control is a priority.

The following managers have excelled in their dedication to measuring and responding to risk and volatility, while maintaining noteable ROR in the process.

These are the five highest ranked programs based on our analysis of the different risk factors we use in our ranking formula, including: a time-weighted Max DD, which looks at drawdowns across the past 1, 3, 5, 10-year periods and worst three-year return.

Top Ranked – Return Focus

Highest Rank Across Return Metrics

managed futures

Show me the money!

Returns are the name of the game, with many investors looking at alternatives to grant them the largest returns possible.

And as the aforementioned managers are great at keeping their eye on the risk, the managers in this category come with larger risks to match those larger returns. But some investors are willing to accept the increase in risk in exchange for the potential of increased returns.

For those investors who are willing to take on some more risk for a higher return number, we look here at only the reward metrics in our model.

The reward metrics include the Omega ratio and the time-weighted compound return. These are the five highest ranked programs based on our reward metrics.

Top Ranked – Risk Adjusted

Reward & Risk

managed futures

The best of both worlds…

Two for the cost of one? We’re talking risk & return in one fund. Risk-Adjusted Performance ratios such as the Sortino attempt to measure how much return a manager makes per unit of risk. They are useful for comparing different managers with different risk profiles to help ascertain what’s better: a 40% return with a 30% drawdown or a 15% return with a 10% drawdown.

The rankings on this page measure a manager’s skill in producing returns in excess of the risk taken on, with risk equaling time-weighted drawdowns and the negative standard deviation of returns.

We deliberately avoid using the Sharpe ratio, which has known flaws, mainly that it considers volatility as the only aspect of risk.

Top Ranked – Low Minimum Investments

$200k or Less Minimum

managed futures

I’m not a Billionaire…Yet!

Are you one of those investors who doesn’t own a private jet, 100ft yacht, or a second home on Lake Como? Yeah, us either.

That’s why this category is hits perfect for those who are looking for a reasonable investment level, but still looking for program performance.

These are the five highest ranked programs, per our overall ranking formula, with minimum investments of $200,000 or less.

Top Ranked – Our Top Recommendations

Programs we know well

managed futures

If you were investing, which program would you pick…?

Due diligence is one of our forte’s. We put a lot of time and effort into performing ‘real time due diligence’ on top-ranked managers, in addition to the dozens of managers our clients allocate to.

This list of programs are ones that we know really well, have done our due diligence on, and will continue to highlight as some of the best in the industry at producing risk-controlled returns.

So if we were picking…..these programs would be some of the ones that make our short list.

Top Ranked – Liquid Alternatives

Managed Futures Mutual Funds

managed futures


The Liquid Alternative investment space has exploded over the past couple of years, making it necessary to include in our rankings.

Better known as Managed Futures Mutual Funds, these are programs which can be bought and sold based on a ticker symbol with lower investment minimums but can come at the cost of not getting exactly the same type of market exposure other private funds in the rankings can offer.

These are the top five ranked funds amongst those Managed Futures Mutual Funds which report to BarclayHedge’s database.

The Overall List

And the Grammy goes to…….our Top 15 Overall. Vetted across our database of 300+ CTAs, we use our unique algorithm to look across return, risk, max drawdowns, and all the other factors that produce our top 15 list overall.

These programs may not produce the highest returns over the next year, or may have a higher drawdown sooner than later (as we know, past performance isn’t always indicative of future returns); but our algorithm equals it all out to provide the 15 programs that should be the most consistent, and provide better risk-adjusted returns than the average CTA over the next 1 to 3 years.

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Article by RCM Alternatives

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