Managed futures may be pooh-poohed by some investment advisors as being “too risky,” but the truth is some of these funds are well managed and understand risk management better than many equity managers.
The annual Pinnacle Awards, presented by the CME Group, the largest futures exchange in the world, and BarclayHedge, the decades-old research and data firm, recognize the best among managed futures funds.
Some might see the awards, held this year at the Four Seasons Grand Ballroom in Chicago with Dennis Miller as host, as another back-slapping event for an industry group that likes to get some attention. But the selection process isn’t a pay- to-play. It’s done through quantitative performance metrics typically used by investors.
Through interviews and surveys with more than 100 asset allocators, the Pinnacle committee determines the criteria most useful to asset allocators to select commodity trading advisors (CTAs) and how they rank in performance.
(Related on ThinkAdvisor: How to Invest With the Best and Brightest Commodity Traders)
This year, the top five measurements used to rank managers were correlation (to relevant indices), length of performance history, minimal drawdown (a lower magnitude of loss compared to other for given time period), net returns and risk-adjusted returns.
Sol Waksman, an industry veteran who heads BarclayHedge, noted, “All of the winners and nominees of the 2016 Pinnacle Awards have done an excellent job in what is widely recognized to have been a very difficult period for CTAs.” Here are some of the standout award winners.
Eckhardt Trading Company
Industry veterans William Eckhardt and Richard Dennis, having had successful trading companies and track records going back to the 1980s, were awarded the Pinnacle Achievement Award.
Today Dennis trades for his own account, but Eckhardt Trading Company, founded in 1991, has $363 million under management. Its Standard program, launched that same year, has had a cumulative total return of 2124%, a compounded annual return of 13.3% and a Sharpe ratio of 0.55, according to BarclayHedge, which provided all the data used for the Pinnacle awards. Although the diversified futures fund lost close to 9% in 2015, it’s up 7% through May of this year and finished 2014 up close to 15%.
Eckhardt and Dennis, who both started in the futures business as floor traders, also created the so-called “Turtle System,” which trained several potential traders early on, many successful in their own right today. Futures lore has it that the Turtle project was a nature vs. nurture bet that the film “Trading Places “was based on, but that’s never been confirmed.
Tianyou Asset Management
Another standout winner at the Pinnacle Awards was Tianyou Asset Management, which won for best Emerging CTA and Best Options Strategy. Bill Zhan’s Tianyou Fund has had a compounded annual return of 35.62% since the fund started in 2012.