Wednesday, August 27, 2008

Time to invest in CTAs

If I had a million bucks I would invest it in CTAs right now and an aggressive one at that. Probably Bill Dunn at Dunn Capital. The graph that I posted above shows the simulated performance of a trend following system and the drawdowns associated with it. Notice that after steep drawdowns such as the one experienced recently, performance tends to be quite good. You could say that the fund has become cheap (like a value investor would say a stock has become cheap after a sell off). This is common among CTAs. Drawdown is a natural result of trendfollowing.

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