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Strong January Performance for Trend Followers

January was a very strong month for trend followers. Almost all funds are now far off their lows. Is this the big turn? Have we started the ascent to new highs? Perhaps. But don’t forget that in this business, we’re not attempting to forecast the future. We just follow a statistically sound method. We tilt the probabilities slightly in our favor and keep repeating. Over and over. In the long run, we’ll win.

In January most funds that reported so far are positive. Best was Mulvaney so far, although they do of course have some catching up to do. They are not strangers to steep drawdowns, but they always made it up in the past. Several other big funds had a great month too. Eclipse, Hyman Beck, Chesapeake, Quantica, Estlander etc.

January 2013 Trend Following Performance

Looking at a little longer time periods, we can also see the pattern. The industry as a whole has been turning upwards and is making up for the losses. Not many funds still have meaningful losses in a three months window.

3 Months Trend Following Performance

 

Of course, if you move to a 6 or 12 month horizon, the industry still has some losses to make up for. What we’ve seen for the past two years is the longest period of drawdowns for the trend following industry so far. The level of the losses was on average slightly more than previously seen as well. It’s a sign that trend following is becoming more difficult. But hardly a sign of the end. Steep drawdowns is one of the downsides with this strategy. It’s well known and something hard to look away from. But every time in history so far, the diversified trend followers have not only made up for their losses. They have also outperformed any traditional investment strategy. On a risk adjusted basis. With lower drawdowns.

6 Months Trend Following Performance

 

12 Months Trend Following Performance

 

NameJanuary3 Months6 Months12 Months
Clarke Capital Worldwide3.710.31.832.0
Heyden Steindl TOMAC21.18.620.123.5
Eclipse Global Monetary7.512.76.612.4
Eckhardt Standard Plus3.74.0-4.75.7
Fort Global Diversified0.32.8-2.93.0
Campbell Global Diversified Large3.97.6-3.12.2
Kaiser Trading Group2.20.4-1.91.5
Quantica Managed Futures6.76.80.61.5
Transtrend Diversified Standard Risk0.0-0.1-5.3-0.2
Quality Global Diversified5.15.6-4.7-0.8
Millburn Diversified Program2.15.2-1.2-0.9
Winton Diversified2.54.9-1.3-1.8
AIMhedge GDF Classic3.46.0-2.5-2.2
Estlander Alpha Trend6.54.2-6.2-2.9
Welton GDP Program2.91.4-6.6-4.4
Rabar Diversified3.11.4-7.6-4.6
IKOS Hedge Fund-0.20.2-2.0-5.0
John Locke Cyril Systematic-0.90.2-8.9-5.0
IKOS Futures Fund-0.5-1.3-5.7-7.3
Hyman Beck Global Portfolio7.211.2-2.1-9.7
Chesapeake Diversified6.94.3-7.9-10.2
Superfund Green L P Series A3.1-0.4-10.6-11.8
Adamah Capital Diversified-2.0-0.6-6.0-13.9
ISAM Systematic Fund Class-0.2-1.5-11.8-14.6
NuWave Combined Futures-2.0-4.6-10.8-15.6
Altradis AlphAlgo-0.74.1-12.3-15.7
M S Capital Global Diversified0.6-0.3-11.8-15.9
DUNN WMA-0.25.7-9.5-16.2
Qbasis Futures Fund A-2.2-1.0-21.7-16.4
Sunrise Capital Diversified3.73.6-13.6-17.7
Amati Systematic Trend Fund-4.3-3.7-15.9-20.1
Robinson Langley Managed Account6.0-1.3-18.3-23.3
Mulvaney Global Markets10.510.2-19.8-23.9

 

There has been several interesting trends responsible for the turnaround in futures funds. Most important of them is the currencies. Anything related to the Euro of the Yen has had huge gains. Best of course, is the cross between the two. Just look at this chart of the RYH3 (Euro/Yen).

 

Euro Against Yen

Naturally the equities rally has helped as well. But equities are by far the most  problematic sector for trend followers. It’s the least profitable and the most volatile. For now they are in our favor. But be careful with this sector.

The most interesting trade in this sector is of course very closely related to the trade above. One might actually claim that it’s the same trade. Look at the Nikkei chart here.

Nikkei

 

Meanwhile the bonds continue to suffer. Many trend followers are now net short bonds. That’s unusual. Yields have been going down for decades. This has been excellent for us. But that game is over and that’s a large reason why trend following is becoming more difficult.

 

I apologize for the low frequency of updates on this site recently. I’ve been busy, not only trading my own fund and managed accounts, but also with starting TradersPlace.net. We’re hoping to build a serious trading site where professionals can meet, network and share ideas. If you haven’t seen it yet, please head over to TradersPlace.net and sign up. It’s completely free of course.