Performance, Persistence, and Pay: A New Perspective on CTAs

Ingomar Krohn, Alexander Mende, Michael J. Moore, Vikas Raman

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

Using a large and representative dataset of commodity trading advisors (CTAs), we provide compelling evidence that CTAs generate significant net excess returns of at least 4.1% annually; that approximately 64% of the funds have positively skewed returns; and that there is considerable heterogeneity among CTAs, with systematic trend followers doing significantly better than other subcategories. More importantly, we find that CTAs not only beat passive, normative benchmarks, with a yearly gross alpha of at least 5.3% but also generate significant, incremental crisis alpha during periods of equity market turmoil. Finally, we show that cross-sectional differences in the performance
of CTAs are persistent up to three years and that managerial compensation predicts fund performance. Our results are consistent with a rational market where investors compete to invest with successful CTA managers who use fees to signal their skills to investors.
Original languageEnglish
Publication date2019
Number of pages53
Publication statusPublished - 2019
Event2019 Financial Management Association European Conference - University of Strathclyde, Glasgow, United Kingdom
Duration: 12 Jun 201914 Jun 2019
https://www.fma.org/glasgow

Conference

Conference2019 Financial Management Association European Conference
LocationUniversity of Strathclyde
CountryUnited Kingdom
CityGlasgow
Period12/06/201914/06/2019
Internet address

Keywords

  • Commodity trading advisors
  • Alternative investments
  • Information and market efficiency
  • Managerial skill
  • Performance

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