6 things investors consider when considering CTAs as part of their investment portfolio? #CTAEU
In his experience, the 6 main things that investors take into consideration when looking at whether to invest in CTAs are:
- Experience in the market will help you to navigate the market extremely well
- Investors (particularly Institutional Investors) like the fact that CTAs offer scale across many markets and multiple strategies
- Robust risk management is key: building and testing the strategy under many different conditions.
- Time frame: short-term vs medium-term vs long-term (allocation across all three may give better diversification)
- Diversified vs sector specific – not all asset classes make money in all years
- Trend following Vs multi-strategy: importance of complimenting your portfolio with non-trend following strategies.
What other factors should be considered when investing in CTAs?
Commitment to research is crucial so the size and depth of research team; dedicated teams for alpha generating systems and electronic trade execution models. Risk management cannot be taken lightly, you need to consider how independent is the team, the multi-factor approach, the return expectations. It is also critical to consider the medium to long-term investment horizon given high volatility profile, correlation and skew.
The political and economic backdrop is changing rapidly so opportunities and trends are certainly on the horizon for CTAs!
What do you think? Do you agree that CTAs offer great opportunities for the future?
Let us know your thoughts below…
Other articles to come out of the CTA World Congress Europe conference include:
> What is the common thread that bonds the CTA industry together?
> Why do CTAs, often called the black box of the investment industry, attract investors?
> The key reasons investors adopt a systematic approach