What is the CTA Challenge?
CTA Challenge Ranking Metrics
Performance-based and Position-based criteria used to evaluate participating programs.
Daily Rate of Return
Daily Rate of Return vs. Daily Volatility
Daily Rate of Return vs. Daily Downside Volatility
Daily Rate of Return vs. Maximum Daily Drawdown
Daily Rate of Return vs. Daily Margin to Equity
[Return on Margin]
Daily Rate of Return vs. Daily Value at Risk
[Return on VaR]
Daily Rate of Return vs. Daily Conditional Value at Risk
[Return on CVaR]
*Ratios used without Risk-Free rate, assuming no interest exposure.
Futures trading involves significant risk and is not suitable for everyone. Transactions in securities futures, commodity and index futures and options on future markets carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily "leveraged". A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit. Past performance may not be indicative of future results. Some programs may be QEP (qualified eligible participants) programs as defined by regulation 4.7 of the Commodity Exchange Act. This is not an offer to invest in any investment program.
About the CTA Challenge:
The CTA Challenge, hosted by Coquest Inc., was created as a way to evaluate and rank investment programs in the Managed Futures asset class. Unlike similar rankings, which focus exclusively on the returns achieved by a program, The CTA Challenge also incorporates the risks taken to achieve those returns. The participants are limited to professionally organized money management companies that are properly registered with government regulatory oversight and are able to take on customer investment accounts, specifically separately managed accounts, that trade solely in the futures markets.
The CTA Challenge utilizes robust quantitative evaluation tools that analyze the performance and risk characteristics of participating Managed Futures investment programs. It was born out of the desire to standardize the intensive quantitative review process required for initial investment analysis of a growing universe of Managed Futures programs.
Our highly skilled and experienced team of research, operations and software professionals put together the formulas and framework needed to generate a more complete picture of each Managed Futures program’s risk and return profile. We took this profile mechanism, added the ranking capability, and then created a portal for outside investors and industry personnel to view the results in a publicly displayed format where Managed Futures programs, of all shapes and sizes, are evaluated on an even playing field.
The result is the CTA Challenge, where we seek to unveil some of the best investment programs in the Managed Futures asset class.
The quantitative portion of the analysis is perhaps one of the most intensive and in depth evaluations that is being performed on investment programs in the Managed Futures asset class by any ranking group. Most of the current publicly available Managed Futures ranking sites and groups gather information from as many investment managers as they can and then provide ranking results solely based on monthly rate of return (ROR). A small portion of these groups factor in the volatility of returns when evaluating Managed Futures programs, but completely ignore the underlying positions that resulted in that volatility. The CTA Challenge is separated from this pack by a few very important items. First, we are tracking daily numbers, not monthly, to gain more insight into a program’s true profile. Second, we receive our data directly from the brokerage house where we track live accounts, removing the ability of an investment manager to massage the numbers that are typically self-reported. Lastly, we use seven different return-based and position-based metrics to evaluate performance, market exposure, risk, and volatility. The position based metrics are key to understanding hidden risks in a program’s track record, helping to reveal not just “what was” but also “what could have been”. The end result is what we believe to be the most robust and unbiased ranking comparison of Managed Futures programs available for the public.
What does this mean for Investors and Industry Brokers?
Coquest provides the CTA Challenge results to the public in an effort to help investors and industry brokers with identifying quality Managed Futures investment programs. When trying to research programs on your own, the amount of information to digest can be somewhat overwhelming and confusing to even the savviest investor. Most ranking sites for Managed Futures investment programs are a mere comparison of monthly or annual returns extracted from a large list of products that only show basic performance info. These ranking sites really do nothing to evaluate the potential risks and leverage utilized to achieve those numbers. The results of these limited evaluations can be skewed and do little to protect a potential customer from investing in high risk products. The CTA Challenge does the heavy lifting to evaluate the majority of quantitative factors we feel are pertinent to get a clear, risk-adjusted view of a Managed Futures program and Coquest provides the results in a very easy to digest fashion. When looking for top ranking programs, investors and industry brokers should be using the CTA Challenge as their first stop in finding quality Managed Futures product.
What does this mean for Commodity Trading Advisors (CTAs)?
Coquest provides the CTA Challenge platform as a robust evaluation tool that analyzes all of the moving parts in a Managed Futures trading program. For the CTA who wants to know exactly how their program will stack against their peers in the industry, the best way is through the robust evaluation and comparison found in the CTA Challenge. We find that many CTAs outperform their peers on ROR alone, but achieving this often involves taking on substantially more risk than most customers would be comfortable with. Disguising a high-risk trading program by focusing just on the advertisement of returns seems to be all too common. The CTA Challenge helps break down, evaluate, and properly rank each of the participating programs among seven different categories to provide a more complete view of the risk-adjusted results...which means ROR alone is not the only driver for quality. The combination of return based risk statistics and holding based risk analysis gives deep insight into what works and doesn't work for a particular CTA's program. The winners of the CTA Challenge that have shown themselves to be the best at generating strong risk controlled returns for the year will be able to utilize the prestige and status of being a top-ranked participant. Results of the CTA Challenge are independently verified by Coquest, and can be used in outside marketing material as well as a reference for confirming a verifiable track record with prospects.
Follow the CTA Challenge
Get regular updates on current leaders and other Challenge news.