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The Journal of Wealth Management

The Journal of Wealth Management

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Article

Are Small CTA Funds Better than Large Ones?
An Empirical Analysis

Daniele Lamponi
The Journal of Wealth Management Fall 2013, 16 (2) 80-87; DOI: https://doi.org/10.3905/jwm.2013.16.2.080
Daniele Lamponi
is a portfolio manager and researcher in Lausanne, Switzerland. daniele.lamponi@gmail.com
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Abstract

CTAs have been particularly successful in the 2008 crisis and this has resulted in a concentration of the industry. But is large better? Although CTA is known to be a very liquid strategy, large funds face some side effects. Although statistical evidence supporting the hypothesis of an over-performance of small funds over large ones is not strong, rational arguments have been put forward: the inability to diversify across a large universe of future contracts due to limited liquidity in selected markets, especially the commodity market, and the increased slippage and market impact due to increased order sizes. This article empirically looks at the question of whether large inflows force managers to change the investment universe of managed futures strategies, finally reducing their exposure to less liquid asset classes. Interestingly, we do not detect a change of allocation to the commodity asset class by large or by small managed future hedge funds. This result seems to praise the research efforts done in large programs using sophisticated optimization tools to exploit the correlation across assets leading to the conclusion that large CTA funds appear to cope well with their size.

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The Journal of Wealth Management: 16 (2)
The Journal of Wealth Management
Vol. 16, Issue 2
Fall 2013
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Are Small CTA Funds Better than Large Ones?
An Empirical Analysis
Daniele Lamponi
The Journal of Wealth Management Jul 2014, 16 (2) 80-87; DOI: 10.3905/jwm.2013.16.2.080

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Are Small CTA Funds Better than Large Ones?
An Empirical Analysis
Daniele Lamponi
The Journal of Wealth Management Jul 2014, 16 (2) 80-87; DOI: 10.3905/jwm.2013.16.2.080
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    • Abstract
    • DATA
    • METHODOLOGY
    • ASSESSING THE BASIC STRATEGY
    • A CLOSE LOOK AT FACTOR LOADINGS BY ASSET CLASS
    • CONCLUSION
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