This is the 20th year Futures has profiled emerging commodity trading advisors (CTAs) and it has been an interesting and tough year.
After 2008, one of the best years in decades for managed futures programs, the going has been much tougher in 2009. More emerging managers lost money than made money in 2009, according to the Barclay Hedge database. The returns have not been terrible, as was the case with equities and convergent hedge fund strategies in 2008, but most managers gave back open equity from established positions in the first quarter and have been chopping around ever since.
When reviewing candidates, we look at not only recent performance but also overall performance and the manager’s general approach to trading.
This year we again looked at where a manager’s allocations came from and fee structure. While acknowledging that raising money with short track records is extremely difficult, we favor managers who refrain from taking allocations from futures commission merchants (FCMs) or introducing brokers who charge added management fees or exorbitant execution fees.
Some previous “Hot New CTA” profiles have gone on to great success and some have slipped into obscurity. This is not an endorsement, but a review of new talent. We would like to thank all the managers who sent us their documentation. We will do this again next year, so look for our announcements.
ASCENDANT: RISING ABOVE THE CROWD
Jacques DeVore has spent the majority of his adult life in the money management business and the Ascendant Asset Advisors’ JLD Managed Futures Trading program, launched in June 2008, is the result of lessons learned along the way.
DeVore went to work at RNC Capital Management after a short stint in the oil business after graduating from the University of California at Davis. He would go on to run his own money management firm and to manage institutional portfolios for Deutsche Bank.
DeVore, a wrestler in college and a competitive athlete throughout his life, describes himself as extremely disciplined, which he says is the key to trading. “Trading futures is the perfect forum for someone with my personality,” he says.
While working as an investment advisor, he noticed a desire among investors for short-term low risk strategies. “Clients were looking for a program that would get them out at the end of the night,” DeVore says. “Closing positions every night makes you a more disciplined trader.”
He describes his methodology as momentum with a counter trend element. “I am looking for extremes throughout the day,” DeVore says. The program looks for the second derivative of price and volume, which is the acceleration of those indicators. “It is kind of like a skate board ramp. The direction of the change is going up, but it is going up at a slower rate. I am looking for those changes and buy or sell based on that,” DeVore says. He mainly applies this method to the E-mini S&P and Nasdaq, but also trades the Treasury complex and occasionally the euro currency. “I put together a lot of programs that identify when those changes are taking place. They are weighted differently depending on which one is giving me the most indication: price, volume, rate of change of volume and direction of trend throughout the day.”
DeVore also will go into the day with a directional bias based on fundamentals. That bias may help him on his exits but won’t dictate what trades he will take. “If I feel the trend for the day is up, I will try and be more long than short but it doesn’t mean the set ups won’t give me more shorts than longs.”
He looks at three-, five- and 10-minute charts to pinpoint changes in the second derivative of price and volume. When the acceleration of those indicators decrease, he looks to enter a position opposite the medium-term trend. “I am looking at the second derivative of all those indicators to come up with where I think a particular move within the day has exhausted itself,” DeVore says. The program is up more than 100% in a little over a year and 31.08% year-to-date through August after its first sizable drawdown (7.93%) in July.
He has been so consistently profitable that he says his July drawdown was beneficial because it assured folks the system was real. “Finally being down 7% in July was great for marketing. It was good that I had the down side. It allows people to look at the numbers,” DeVore says.
The average duration of a trade in the program is 17 minutes. While he is looking for reversals, he may just find a short-term correction in a medium-term trend that lasts a couple of bars. “If I am in the trade long usually it is a mistake. In some cases the ramp flattens out and the ball keeps going. That is the danger zone for me. That is where stops and money management come in,” he says. He rarely carries a trade overnight and if he does, he will cover it with options. “I lean to the short side. Most of the time the market moves up more than down. If that is the case, I see more looks based on my acceleration and velocity model,” he says.
But the short-term nature of the program allows him a lot of looks and his disciplined approach keeps him from hanging on to a losing proposition.
For more information on Ascendant, visit their Web site, www.ascendantasset.com