Research
“There is a principle which is a bar against all information, which is proof against all arguments and which cannot fail to keep a man in everlasting ignorance — that principle is contempt prior to investigation,” wrote philosopher Herbert Spencer.
Primer
Investing in managed futures programs.
Understanding the risk of futures, cash allocations, and portfolio constructions.
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Managed futures are an efficient way for institutional investors to achieve portfolio and market diversification.
This paper focuses on the key risk factors when allocating to managed futures programs: leverage, margins, volatility and drawdown risk. Part 1 – Leverage: Uses an example of buying $100,000 worth of Oil to illustrate the different ways of funding and building leverage between a fully funded cash investment, a debt financed investment, and futures investment. Part 2 – Cash allocation: Applies the concepts of Part 1 to illustrate how an investor may assess the risks and allocate cash when investing in a managed futures program or multiple programs using segregated managed accounts (SMAs). Part 3 – Program selection and trading level: Introduces key metrics that help selecting managed futures programs to construct a multi program portfolio. It shows the power of diversification and scalability of managed futures program portfolios. It discusses how to determine the trading level based on.... |
7 Reasons for J8 GARS
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We discuss seven key benefits of J8 GARS for investors: Protection against inflation risk, crisis alpha, diversification benefits, downside risk management, cash efficiency, portfolio efficiency, liquidity, and transparency.
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Prudent Innovation
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Using liquid alternatives in portfolio construction
Adding a liquid alternative investment allocation to a classically diversified equity and bond portfolio would have improved the risk adjusted aggregate returns twofold and reduced the drawdown impact by half over the past seven and a half years. Furthermore, since the onset of the global pandemic in 2020, such a portfolio enhancement would have resulted in an effect that would have even been twice as significant. |
Fear, greed, and hope - mitigating the 'attachment bias'
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We explore the cognitive biases of investors: letting losses run and exiting profitable trades prematurely, chasing performance, feeling the pain of losses twice as hard as the joy of gains, or holding on to a conviction simply because of a notion that it may have worked in the past.
We show how a systematic approach to investing and decision making can mitigate such an ‘attachment bias’ and serve long-term inter-generational wealth preservation and growth. |
J8 GARS - 2021 performance review
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The J8 Global Absolute Return Strategy (J8 GARS) finished 2021 up +9.31%. More importantly, the J8 GARS program had three key return analytics: i) return over volatility; ii) return over drawdown; and iii) volatility over drawdown rank “best in class” as compared to the 10 largest global systematic trend-following programs. The strategy saw significant investor inflow and is now at USD 36 million assets under management.
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J8 GARS drawdown analysis
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Does “buying the dip” work for selecting the investment point in a systematic absolute return strategy?
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Simplicity is key!
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“Simplicity is not a simple undertaking!” commented one of our investors, highlighting that our J8 Global Absolute Return Strategy (J8 GARS) is really a simple program, but underlying this simplicity are many complex constructs that result in a tightly risk managed solution, focused on persistent returns.
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J8 GARS vs. carve-outsWe examine how the performance of carve-outs of J8 GARS compare to the full J8 GARS program. We want to find out if carve-outs promise better risk and return properties than the broadly diversified J8 GARS program. We find that the sum of parts is stronger than the single parts.
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J8 GARS - 2020 performance reviewThe J8 Global Absolute Return Strategy (J8 GARS) completed 2020 with a new all-time high. The strategy returned +11.64% in 2020. More importantly, the J8 GARS program had a volatility over drawdown ratio that ranks “best in class” as compared to the 10 largest CTA trend following programs.
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J8's liquid alternative strategy enhances traditional portfolios
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Our analysis shows that an allocation to J8 can potentially improve traditionally diversified investment portfolios significantly by seeking to reduce portfolio volatility and enhancing portfolio returns.
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CTAs – A continuing success story
Emerging Manager Forum, CTA Expo, May 20th, 2020.
Tillmann Sachs
Tillmann Sachs
Commodity Indices – Enhanced Tool for Portfolio Management
Multi Commodity Exchange of India (MCX), Commodity Insights Yearbook 2018, pp. 38-45
Tillmann Sachs, Valentin Georgescul
Tillmann Sachs, Valentin Georgescul
The objective of this paper is to show how commodity indices can enhance investment portfolio returns and reduce risk.
First, we discuss the nature and construction of commodity indices. We distinguish between traditional long only benchmark indices and alternative long/short risk premia indices.
Second, we show the portfolio benefits of adding commodity benchmark indices to traditional fixed income and equity portfolios and adding long/short commodity risk premia indices to alternative investment portfolios.
Thirdly, we discuss the implementation of commodity indices, how they are offered, typical investor profiles, and how investment constraints can be addressed. .... MORE
First, we discuss the nature and construction of commodity indices. We distinguish between traditional long only benchmark indices and alternative long/short risk premia indices.
Second, we show the portfolio benefits of adding commodity benchmark indices to traditional fixed income and equity portfolios and adding long/short commodity risk premia indices to alternative investment portfolios.
Thirdly, we discuss the implementation of commodity indices, how they are offered, typical investor profiles, and how investment constraints can be addressed. .... MORE
A liquid and investible Benchmark Index for the Commodity Trading Advisor and Managed Futures industry
Journal of Index Investing, Institutional Investor Journals, Spring 2016, Vol. 6, No. 4, pp. 30-70.
Tillmann Sachs, Robert L.K. Tiong
Tillmann Sachs, Robert L.K. Tiong
In 2014 and 2015 we surveyed investors and managers and asked “CTAs – How do they do it?” The survey responses allow us to explain the complexity of the CTA and Managed Futures industry with a simple, survey-led index model: by trading global liquid markets with momentum indicators in a risk weighted basket, managed to a target volatility and charging 2/20 for it. The index is liquid, investible, and replicable. It may serve as benchmark for the CTA industry as it is representative of the most common methodologies used by the industry. ... MORE
Common Denominators: Markets traded by CTA and managed futures funds
The Hedge Fund Journal, September 2014, Issue 97, pp. 32-33.
TILLMANN SACHS, HUI YU CHEN, ROBERT L.K. TIONG
TILLMANN SACHS, HUI YU CHEN, ROBERT L.K. TIONG
[...] There is clear trend in popularity of traded markets within the CTA industry. All survey participants were asked for their opinions on which markets represent the most relevant or common markets traded by CTAs, and multiple selections were possible. The survey covered a total of 82 markets, of which 27 markets were commodity markets, 10 government bond markets, six interest rate markets, 12 equity index markets, one volatility market, nine G10 currency markets, and 17 emerging market (EM) currency markets. [...] MORE
Common Denominators: Portfolio Construction and Fees - Building an Index for the CTA industry
The Hedge Fund Journal, January 2015, Issue 101, pp. 54-57.
TILLMANN SACHS, HUI YU CHEN, ROBERT L.K. TIONG
TILLMANN SACHS, HUI YU CHEN, ROBERT L.K. TIONG
[...]This article follows on from an earlier article published in The Hedge Fund Journal (Issue 97). The first article presented the most popular markets traded by the CTA industry. This article presents the survey results on the most popular return engines, portfolio management methods and fee structures in the CTA industry, and presents an investible index based on these survey findings. The full survey report has been published in the Journal of Index Investing with the Institutional Investor Journals in the winter 2014 issue [...] MORE
Common denominators in the CTA and managed futures industry: A survey report
Journal of Index Investing, Institutional Investor Journals, Winter 2014, Volume 5, Number 3, pp. 46-58.
Chen, H., Sachs, T., Tiong R.
Chen, H., Sachs, T., Tiong R.
How do CTAs generate returns? Which markets do they trade? How do they allocate risk, manage money, and what fees do they charge?
We conducted an international survey to establish “Common Denominators in the CTA and Managed Futures Industry”. This paper presents the results and conclusions from the survey.
The survey finds that the CTA and managed futures industry may be generalized in trading popular key global markets in a risk weighted momentum portfolio managed to a target volatility and applying a 2/20 fee structure. ... MORE
We conducted an international survey to establish “Common Denominators in the CTA and Managed Futures Industry”. This paper presents the results and conclusions from the survey.
The survey finds that the CTA and managed futures industry may be generalized in trading popular key global markets in a risk weighted momentum portfolio managed to a target volatility and applying a 2/20 fee structure. ... MORE
Correlation is not always what it seems - an often overlooked aspect in time series analysis
The Hedge Fund Journal, June 2014, Issue 95, pp. 24-25.
TILLMANN SACHS, CHONG IT TAN and ROBERT TIONG
Many CTAs and other money managers use correlation in time series analysis in their daily work to derive investment decisions on asset allocation, risk and money management, tactical overlays, or selection of products or markets.
In J8, we do not use correlation to achieve future diversification benefits or to derive investment decisions thereupon. We focus our efforts on ... MORE
TILLMANN SACHS, CHONG IT TAN and ROBERT TIONG
Many CTAs and other money managers use correlation in time series analysis in their daily work to derive investment decisions on asset allocation, risk and money management, tactical overlays, or selection of products or markets.
In J8, we do not use correlation to achieve future diversification benefits or to derive investment decisions thereupon. We focus our efforts on ... MORE
Quantifying Political Risks in Infrastructure Projects
PhD Thesis, 2007
TILLMANN SACHS
TILLMANN SACHS
How to quantify risks in the absence of historical data or time series? This book develops a methodology to quantify expert opinion on risk factors which have significant impact on cash flow projections in life-cycle infrastructure projects. ... MORE