Absolute Returns

Absolute return strategies enable CTAs to produce returns regardless of market direction, employing a broader toolkit of investment instruments.

CTAs may be commonly associated with “absolute return strategies,” as returns generated can be independent of financial markets. Absolute return strategies enable CTAs to produce returns regardless of market direction. While traditional strategies implement long-only techniques to drive client return, absolute return strategies employ a broader toolkit of investment instruments. These instruments may include short selling, futures, options, derivatives, and use of leverage. It is this versatility of absolute return strategies that drives alpha generation, or risk-adjusted outperformance relative to a benchmark.

We can compare risk-adjusted performance between benchmarks using Sharpe ratios, where a higher ratio represents better risk-adjusted returns. The chart below examines the returns, volatility, and Sharpe ratios of the Barclay CTA Index, a benchmark measuring the performance of CTA managers versus the common benchmarks of stock, bond, and commodity markets in the period between January 1985 and July 2009.

Managed Futures - Absolute Returns

As this table demonstrates, managed futures have historically outperformed competitive benchmarks while offering investors similar risk-adjusted performance and comparable risk exposure.

 

›› Learn how managed futures can diversify your portfolio
›› Learn about non-correlation to stocks and bonds
›› Access Popular CTAs/CTA Database
›› Contact a Novus Investments representative


Novus Investments Precious Commodities Top Performing CTA