THFJ – Common Denominators in CTAs: Portfolio Construction and Index

While the choice of markets is one distinguishing factor between CTAs and managed futures programmes, the choice of return engines, risk allocation, money management, and fee structure are the next main distinguishing factors. The “Return engine” tell us how managers generate returns from the underlying markets. “Risk allocation” tells us how managers weigh the different underlying markets or in signals, and “money management” how they and allocate and mange money. Finally, we discover which fee structures are most common in the CTA and managed futures industry.