Welcome to BarclayHedge

#1 Alternative Investment Resource
See hedge fund rankings, indices, exclusive third party research, and more when you join for FREE.

QUICK SIGN UP
Instant access after activation.

Not a member yet? Sign up!

X Member Login

Lost your password?
Contact us: +1 (641) 472-3456

CTA VAI™ (Value Added Index)

The CTA VAI™ (Valued Added Index) illustrates the benefit of Managed Futures and two core characteristics:

  • Managed Futures consistently adds risk-adjusted value over the long term - not only in times of financial crisis.
  • There is a timing aspect to adding or increasing exposure to Managed Futures.

Figure 1: Risk-Adjusted Value Add of including 10% in Managed Futures

Parameters

  • CTA VAI™ compares the Sharpe Ratio of a 90/10 portfolio that has a 10% allocation to Managed Futures versus an all S&P portfolio. Barclay BTOP50 Index is used for the 10% allocation.
  • Index computes the value added difference in Sharpe Ratios between the two portfolios on a rolling 60 month basis.
  • A positive number is reflective of the additive risk-adjusted benefit of using Managed Futures within the portfolio.
  • 60 month period captures both up and down cycles in the equity market.

Results

  • The CTA VAI™ is mostly positive illustrating that historically there is a risk-adjusted long term benefit to including Managed Futures within a portfolio.
  • Including 10% Managed Futures to the portfolio has added value in rising and falling equity markets.
  • The 90/10 portfolio has improved the return with significantly less risk. (See Table 1 below.)

Table 1: Portfolio Improvement with 10% Managed Futures

Timing

  • When the CTA VAI™ has dislocated the most from the S&P, it has been a valuable time to add CTA exposure.
  • When the CTA VAI™ dipped under 4 and the spread was the greatest, the next 36 months the Barclay BTOP50 Index gained an average of 60% (see 4 grey zones).
  • For more information on dynamically adjusting exposure, please see the White Paper

Methodology

The CTA VAI™ is calculated taking the Sharpe Ratio of a portfolio including 90% S&P 500 and 10% Barclay BTOP50 Index (rebalanced annually) minus the Sharpe Ratio of the S&P 500 multiplied by 100. Example: Dec. 2002: -0.05 minus -0.10 = 0.05 multiplied by 100 = 5.59.


The CTA VAI™ was created by Auspice Capital Advisors.
For more information, click to download the White Paper .


DISCLAIMER: Past performance is not necessarily indicative of future trading results. The funds represent speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his or her investment.

 

back to top

Home | Privacy | About Us | Blog | Articles | Terms of Use | Advertise | Contact Us | Follow Us Follow us on Twitter | © 2014 BarclayHedge, Ltd