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Trend Following Wizards performance for 2013

January 23, 2014
16 people like this post.

This week’s blog article brings your attention to a Trend Following Wizards blog page that I have kept an eye on for a few years. I have done so because of the pedigree of the traders who are followed by this blog – giants of the industry such as original and “second generation” Turtles, founders of the AHL Fund and others with decades of investing experience.

One of the common traits of these money managers is that they all use trend-following, systematic approaches to some degree for part or all of their investment approach. Between them, they cover the full spectrum of markets and instruments including equities, futures, commodities and both long and short. Their returns over the years have varied to and from both ends of the performance spectrum.

I bring this blog to your attention to assist you in gaining perspective, especially with respect to expectations. I’m sure that your first reaction when viewing the full year’s performance for 2013 for these giants of the active investing world will be how poor most of their performance was for 2013.

For example, the Man AHL Diversified Fund finished down -2.6% for the year. This fund has been one of the most successful money managers in the world over the last 25 or so years with periods of many consecutive years where they have achieved > 20% p.a. return.

The four most successful Trend Following Wizards from the list during 2013 achieved returns of 43%, 34%, 25% and 22% for the year.

The money manager that achieved +34% in 2013 achieved -18.6% in 2012, the +25%’er achieved -17.8% in 2012 and the +22%’er achieved -19% during 2012!

What’s more, the worst performer for 2013 at -22.9% was the best performer in 2012 coming in at +15%.

However, this is just one or two years from, for some, as many as 40 years. The major point here is that there is no approach or system that is always in sync with the market. Periods of underperformance and drawdown are guaranteed. The key is to keep on keeping on, provided that your approach has a demonstrated edge that outperforms over a large sample of trades.

Another key is that your system deploys a call to action that will ensure the preservation of capital during market periods that are counter to your strategy.

One explanation to the variation in results, as highlighted above for these money managers, is that most of them deploy long and shorting approaches. At times both approaches can be out of sync with the market.

So herewith is the link to the latest Trend Following Wizards blog, which covers the returns for the month of December 2013 and, more importantly, the full calendar year results for 2013. I have also provided the link for the 2012 performance for your edification and easy comparison.

Trend following performance for 2013.

Trend following performance for 2012.

To put this performance into perspective, herewith is the performance of a systematic long only equities strategy that either invests 100% or 50% into cash during down periods (HRM = High Risk Market) in the equities markets.

2013 2012
ASX Equities & 100% Cash in HRM
(no leverage)
13.1% 13%
ASX Equities & 50% Cash in HRM
(no leverage)
23.5% 9.8%
ASX Equities & 100% Cash in HRM
(with leverage)
41.3% 24.3%
NASDAQ Equities & 100% Cash in HRM
(no leverage)
52.2% N/A
All Ordinaries 14.8% 13.4%

 

But as I point out above, two years is simply not enough over which to evaluate a strategy. Over 13 years from January 2001 to current, through some major market up’s and down’s, the track record of this equities/cash strategy, including brokerage costs, is:

2001 – 2014
ASX Equities & 100% Cash in HRM
(no leverage)
689%
ASX Equities % 50% Cash in HRM
(no leverage)
425%
All Ordinaries 62%

 

Yes, this is our SPA3 strategy.

Gaining perspective about one’s investing expectations and outcomes is a major trait that investors of all kinds need to achieve.

 

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16 people like this post.

Comments

  • Dave Payne says:

    A very timely post for me thanks Gary. I’m experiencing some ‘chop’ with some of my systems and note that your SPA 17.07 has not yet returned to ‘buy’ mode, and hence this side of my portfolio has not had the drawdown as it is 100% in cash. I look forward to the next ‘Low market risk’ signal to engage this portfolio. Good product your SPA 3.

  • Dave Moran says:

    Also interesting to note that from the Wizards performances source that you kindly provided, and just looking at those funds that are reported for each of the past 3 years (2011-2012-2013) – (there’s 22 of them) – 7 of the 22 (ie. approx. 32% of them) made losses in each of the past 3 successive years.

    Looking at the accumulated returns over the 3-year period in question, only 4 of the funds managed to achieve positive, albeit mostly small, returns (namely 16.1%, 8.4%, 4.9% & 0.6%). The other 18 funds (82% of them) had negative returns over the 3-year period – ranging from -0.7% to -37.8%. Of the 22 funds included, the median return across the 3 years was -12.0%.
    The public SPA3 Portfolio – Risk Profile 1, starting with its comparatively paltry (to some) $713,000 at the end of Dec. 2010, managed to eke out a +10.6% return over that same 3-year period. That’s up there ahead of Dave Harding’s Winston Capital ‘Diversified Program’ even!

  • Dave Haskins says:

    Have been using your SPA3 system on the JSE for past 3.5 years. Returns have been: 2009/10 (6 months only) = 12%; 2010/11 = 22%; 2011/12 = 11%; 2012/13 = 24%
    These returns are far better than most unit trusts on the JSE over the same time period.
    SPA3 certainly delivers in the JSE market.

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