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Alternative Market Briefing

Volatility is key driver in managed futures funds

Wednesday, November 14, 2012

By Beverly Chandler, Opalesque London:

CTAs are defined by their volatility and speakers at the Opalesque Managed Futures Roundtable, sponsored by Efficient Capital Management, and Eurex, discussed how they cope with the phenomenon.

Sam Gover of Altiq Asset Management said that volatility could be looked at from a number of perspectives: "In the extreme case you are worried about shocks in markets which are by definition unexpectedly large. It is more significant in the CTA industry where you are holding a relatively small portfolio of instruments. Even if you have 50 plus markets which are fairly liquid, many of them are correlated, so you are actually holding a fairly small portfolio of global risks" he said. "But by definition you cannot do anything about unexpected shocks because you do not know when they are going to arrive. All you can do really is try to make sure that your portfolio is as diversified as possible so that when they do hit, they do not have an outsized effect on the portfolio. Even if you trade a relatively small number of instruments, you can still try to do that, by limiting position sizes, by keeping the portfolio balanced across instruments."

Gover added: "From a short-term trader’s perspecti......................

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