{"title":"Trend Following Made Easy: How to Create a CTA from Scratch","authors":"Nicolas Rabener","doi":"10.3905/jai.2023.1.186","DOIUrl":null,"url":null,"abstract":"CTAs have generated strong returns in 2022 and regained investors’ interest in improving portfolio diversification. However, given their nature of being simultaneously long and short multiple asset classes and constantly changing their portfolios, they often are viewed as black-box strategies. We show that CTA performance can be approximately replicated top-down by using just four asset classes, as well as by creating a CTA bottom-up utilizing 59 indexes. Neither process is complicated and both increase transparency on the investment process and portfolio construction of CTAs, which may help investors become more comfortable with this investment strategy.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.4000,"publicationDate":"2023-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Alternative Investments","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.3905/jai.2023.1.186","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
CTAs have generated strong returns in 2022 and regained investors’ interest in improving portfolio diversification. However, given their nature of being simultaneously long and short multiple asset classes and constantly changing their portfolios, they often are viewed as black-box strategies. We show that CTA performance can be approximately replicated top-down by using just four asset classes, as well as by creating a CTA bottom-up utilizing 59 indexes. Neither process is complicated and both increase transparency on the investment process and portfolio construction of CTAs, which may help investors become more comfortable with this investment strategy.
期刊介绍：
The Journal of Alternative Investments (JAI) provides you with cutting-edge research and expert analysis on managing investments in hedge funds, private equity, distressed debt, commodities and futures, energy, funds of funds, and other nontraditional assets. JAI is the official publication of the Chartered Alternative Investment Analyst Association (CAIA®). JAI provides you with challenging ideas and practical tools to: •Profit from the growth of hedge funds and alternatives •Determine the optimal mix of traditional and alternative investments •Measure and track portfolio performance •Manage your alternative investment portfolio with proven risk management practices
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