SYSTEMATIC GLOBAL MACRO ( CTAs ):

Size: px

Start display at page:

Download "SYSTEMATIC GLOBAL MACRO ( CTAs ):"

Imogene Weaver
6 years ago
Views:

1 G R A H M C A P I T A L M A N G E M N T G R A H A M C A P I T A L M A N A G E M E N T GC SYSTEMATIC GLOBAL MACRO ( CTAs ): PERFORMANCE, RISK, AND CORRELATION CHARACTERISTICS ROBERT E. MURRAY, CHIEF OPERATING OFFICER, GRAHAM CAPITAL MANAGEMENT, LP PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE E RESULTS 1

2 Systematic Global Macro: Benefits Positive annual returns for more than 20 years Low to negative correlations to most other asset classes and hedge fund strategies Managed accounts lead to increased transparency Strong historical performance during crisis periods 2

3 VS. TRADITIONAL ASSET CLASSES G R A H A M C A P I T A L M A N A G E M E N T Barclay Systematic Barclay Systematic Traders Index ("BSTI") 1.00 Low Correlation to Other Asset Classes Traders Index S&P 500 MSCI EAFE Index Lehman Brothers T-Bond Index S&P MSCI EAFE Index Lehman Brothers T-Bond Index VS. ALTERNATIVE ASSET CLASSES Barclay Systematic Traders Global Equity Fixed Event Long/Short Convertible Dedicated Emerging Index Macro Market Income Driven Equity Arbitrage Short Bias Markets Barclay Systematic Traders Index ("BSTI") 1.00 Global M acro Equity M arket Neutral Fixed Income Arbitrage Event Driven Long/Short Equity Convertible Arbitrage Dedicated Short Bias Emerging M arkets

4 Conditional Correlations Correlation with S&P 500 Index Up Months Down Months All Months BARCLAY SYSTEMATIC TRADERS INDEX Global Macro Equity Market Neutral Fixed Income Arbitrage Event Driven Convertible Arbitrage Long/Short Equity Dedicated Short Bias Emerging Markets Index

5 10% G R A H A M C A P I T A L M A N A G E M E N T Performance During Stress Periods for S&P 500 JANUARY 1994 DECEMBER % 0% -5% -10% -15% -20% Aug-97 Aug-98 Jan-00 Sep-00 Nov-00 Feb-01 Mar-01 Aug-01 Sep-01 Apr-02 Jun-02 Jul-02 Sep-02 Dec-02 Jan-08 Jun-08 Sep-08 Oct-08 Nov-08 S&P 500 ROR Barclay Systematic Traders Index ROR 5

6 15.00% 10.00% 5.00% 0.00% G R A H A M C A P I T A L M A N A G E M E N T Performance during Stress Periods for Hedge Fund Strategies Systematic Traders 7.51% AUGUST 1998 OCTOBER 1998 OCTOBER 2008 NOVEMBER 2008 Systematic Traders -1.01% Systematic Traders 4.56% Systematic Traders 2.06% -5.00% % % % % % Emerging Markets % Event Long/ Driven Short % Equity % Dedicated Short Bias Global -8.69% Macro % Convertible Fixed Arbitrage Income % Arbitrage % % % % Equity Market Neutral % 6

distributions having thinner left tails than right tails.

7 Skew & Kurtosis Skew: Skew is a measure of a distribution s symmetry. Skew of zero indicates the distribution is symmetric; negative skew distributions have thicker left tails than right, with positive skew distributions having thinner left tails than right tails. Positive Skew Negative Skew Kurtosis: Kurtosis is a measurement of the thickness of a distribution s tails. Excess kurtosis of zero indicates the distribution has the realization of tail events occurring at about the same frequency as a normal distribution. Lower Kurtosis Higher Kurtosis 7

8 Skew & Kurtosis of Hedge Fund Strategies Standard Deviation from Mean (z-score) -14 to to to -8-8 to -6-6 to -4-4 to -2-2 to 0 0 to 2 2 to 4 4 to 6 Skew Excess Kurtosis BSTI Dedicated Short Bias Global Macro Long/Short Equity Emerging Markets Event Driven Convertible Arbitrage Fixed Income Arbitrage Equity Market Neutral

9 Autocorrelation Autocorrelation measures the tendency of an above average return to be followed by another above average return. Positive autocorrelation of monthly returns leads to an increased volatility of annual returns. Negative autocorrelation of monthly returns leads to a decreased volatility of annual returns. Incorporating statistically significant autocorrelations of monthly returns is important to accurately measure annual volatility. 9

10 One Month Lag Autocorrelation One Month Lag Autocorrelation: The correlation between one month s return and the previous month s return. One Month Lag BARCLAY SYSTEMATIC TRADERS INDEX Global Macro 0.10 Equity Market Neutral 0.08 Fixed Income Arbitrage 0.51 Event Driven 0.39 Convertible Arbitrage 0.57 Long/Short Equity 0.22 Dedicated Short Bias 0.09 Emerging Markets Index

11 Autocorrelation & Volatility Information Ratio disregarding Autocorrelation Information Ratio incorporating Autocorrelation Information Ratio Difference BARCLAY SYSTEMATIC TRADERS INDEX Global Macro Equity Market Neutral Fixed Income Arbitrage Event Driven Convertible Arbitrage Long/Short Equity Dedicated Short Bias Emerging Markets Index

12 Sample Portfolio Construction The weightings for each portfolio listed below have been optimized for different risk/return ratios. PORTFOLIO A: PORTFOLIO B: PORTFOLIO C: PORTFOLIO D: Maximum Information Ratio (disregarding Autocorrelation) Maximum Information Ratio (incorporating Autocorrelation) Maximum Calmar Ratio Portfolio Weight Sortino Ratio Portfolio BARCLAY SYSTEMATIC TRADERS INDEX 14% 20% 20% 20% Global Macro 4% 4% 20% 6% Equity Market Neutral 4% 4% 4% 4% Multi-Strategy 20% 4% 4% 14% Fixed Income Arbitrage 4% 4% 4% 4% Event Driven 20% 18% 16% 20% Convertible Arbitrage 4% 4% 4% 4% Long/Short Equity 13% 18% 4% 13% Dedicated Short Bias 13% 20% 20% 11% Emerging Markets Index 4% 4% 4% 4% Weight 12

13 Comparison of Optimal Portfolios PORTFOLIO A: PORTFOLIO B: PORTFOLIO C: PORTFOLIO D: Maximum Information Maximum Information Maximum Calmar Maximum Sortino Ratio (disregarding Ratio (incorporating Ratio Portfolio Ratio Portfolio Autocorrelation) Autocorrelation) Weight Weight Information Ratio (disregarding Autocorrelation) Information Ratio (including Autocorrelation) Calmar Ratio Sortino Ratio

Manager Comparison Report June 28, Report Created on: July 25, 2013

Manager Comparison Report June 28, 213 Report Created on: July 25, 213 Page 1 of 14 Performance Evaluation Manager Performance Growth of $1 Cumulative Performance & Monthly s 3748 3578 348 3238 368 2898