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Galen Burghardt From Kirsten Bischoff, Opalesque New York:

“It is extraordinarily difficult to build a portfolio whose returns don’t look like trend following returns, even under the best of circumstances,” cites research published by Newedge Group this summer. The in-depth report discusses the findings of Galen Burghardt, Ryan Duncan and Lianyan Liu, who constructed and studied a CTA Trend Sub Index, and in the course of creating that sought to answer three questions about correlation in the CTA industry.

- How is it possible for the correlation between returns on the Newedge CTA Trend Sub Index and those on the broader Newedge CTA Index to be as high as they are when the pair-wise correlations we observe are substantially lower?

- How hard is it to build a CTA portfolio whose returns are not highly correlated to a pure trend following CTA portfolio?

- How is it that IKOS, which is not principally a trend following CTA, appears in a large correlation cluster with a group of well-known trend followers?

During a recent interview with Greg Despoelberch on Opalesque TV, Burghardt said that the new trend following index set out to help fund of funds and other investors who had come to Newedge and asked for research on how to construct a CTA portfolio that does not correlate to trend f......................

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