Interview with Bernhard Steiner

How do you select your CTAs?

We search CTAs with a consistent stile and a return pattern that is coherent to its stile. We need to find out how a CTA is trading. Why can he make money? What is his edge? And does the CTA really know how he is making money. In order to find answers we make common due dilligence and quantitative analysis. But even if our quantitative analysis is quite sophisticated it is most important to us that the CTA is a real professional, reliable and transparent.

What is the edge in your quantitative approach?

Our quantitative analysis goes some steps ahead of the common. We want to find out in what sort of market conditions a CTA is best suited.

We have defined a set of CTA Base Strategies. For each of those strategies a mathematical formulation was derived in order to calculate a set of historical return time series. Based on those typical return patterns we can analyze the dominant CTA Base Strategy for each CTA.

Furthermore we analyze how each CTA Base Strategy fits to certain market regime. They are characterized by very fundamental assessments like e.g. bear or bull market, trendy or sideway movements in the different assets classes, volatility, liquidity.

In combination of this analysis we find out with certain reliability how a CTA will behave in different market conditions.

And what is the customer’s benefit of this knowledge?

The selection of CTAs is mostly done based on past performance. We belief that it is great to find a CTA who was very good in the past but will he be as good in future markets? What we do is turning this sort of a guessing game into a clearly structured logical procedure. For example we need to known the real risks of a CTA strategy not just the risks the CTA has seen till today. We want to understand his return patterns. Without the knowledge of such key elements of a CTA strategy it is not possible to build robust CTA portfolios for the future.

Our goal is to be at the forefront of investment advising in Managed Futures. This is an ambitious claim. With our sophisticated approach for CTA selection and monitoring we will reach our target to provide the best CTAs to our clients.