FTC's year in review: all strategies prove to be world-beaters
FTC's funds stood up extremely well to the exceptional year that was 2008. The futures strategies as well as the systematic stocks fund of funds FTC Gideon I were among the world's best in terms of performance and risk.
The second year of the global economic crisis brought record losses and volatility to the stock markets as well as unprecedented instability in the money and currency markets. These economic conditions proved extremely challenging for the majority of trading strategies. The main exception in the alternative investment sector was systematic Managed Futures strategies, which had positive returns in 2008.
Early estimates from alternative investment index providers show returns of 15-20% for Managed Futures, leading the industry. FTC's two Managed Futures funds came in well above average. The euro-quoted FTC Futures Fund Classic ended the year +41.95% with volatility of 17.84% and a risk/return ratio (modified Sharpe Ratio) of 2.35. Risk-adjusted, 2008 was the best year in the fund's history. FTC Classic, listed in the major Managed Futures indices and in cross-sectoral comparisons, was recognized at the top of its peer group in several instances. In the first two quarters, for example, it topped the single manager table of German alternative investment magazine "absolute|report" and emerged as the best euro-denominated Managed Futures fund in the third quarter.
The dollar-denominated sister fund FTC Futures Fund Dynamic performed even better at 54.66% and also posted its best ever result. Volatility for the calendar year was also higher at 24.68%, which corresponds to a modified Sharpe Ratio of 2.21.
Compared with other funds in its sector, FTC Commodity Fund Alpha also had group-topping performance. The commodity fund is traded systematically and using the same long/short strategy as the diversified funds. Whereas commodity indices ended the year with dramatic losses (e.g. S&P GSCI: -46.49%), FTC Commodity Alpha closed the year with its highest ever annual return. A return of 29.51% was achieved with volatility for the year of 20.68% (modified Sharpe Ratio: 1.43).
FTC Gideon I, the systematic (long-only) stock strategy based on a public fund of funds, was not completely able to buck the trend, posting a slight loss for the year of -5.52% (volatility: 5.57%), but nevertheless managed to significantly outperform other equity products as well as its reference index: the MSCI World Index (euro) ended 2008 with a return of -39%.
Eduard Pomeranz, CEO of FTC Capital, attributes the consistent and, more importantly, risk-adjusted significant outperformance of the funds to the innovations of the FTC trading system implemented over the last 2 years: "In what has been a highly volatile 2008, systematic risk management in particular has clearly set us apart from managers who may ultimately have delivered similar returns but who also had to pay the price of higher fund value fluctuations, that is to say higher risk." The biggest challenge for 2009, says Pomeranz, will be in dealing with the ripple effect of the financial crisis, which already affected many of FTC's customers last year. "The pressure to realize profits from the few assets with positive yields has increased noticeably among our investors. One of FTC's goals for the year is therefore to significantly increase the assets under management."
According to Pomeranz, 2009 will be a year of multiple innovations. He announced two additional trading systems for the Managed Futures strategies, which do not correlate with trend-following models and which have been integrated into the funds in the last few months. "We expect these additions to make the system mix even more robust and consequently the funds to be even less susceptible to high value fluctuations." Also in the cards is another system for the FTC Gideon I stock strategy, designed to trade stock index futures (long & short). Pomeranz: "This development will essentially enable us to make a positive portfolio contribution even in years where stocks post negative returns."