The RPM Evolving CTA programme has returned 6.6 per cent net to investors since its inception in March last year, despite unusually tough market conditions for CTAs.
In addition, it outperformed the Newedge CTA index by 7.4 per cent – an index consisting of 20 of the largest CTAs in terms of assets under management. On a risk-adjusted basis, the outperformance was even larger.
“The result supports our research findings, but it is a bit better than what we had hoped for”, says Mikael Stenbom, CEO of RPM Risk & Portfolio Management AB, the investment manager based in Stockholm, Sweden.
The Evolving CTA concept is based on the observation that, on average, increasing AUM and age go hand in hand with decreasing returns for managers. Most of the large and well known managers through history had significantly higher returns when they were in their early years, trading smaller assets.
By using age and AUM as criteria, RPM constructs four dynamic sub-universes of CTAs and focus their attention and due-diligence process on managers that have left the start-up or “emerging” phase and entered into the growth or “evolving” phase. This is where the relationship between return and risk is most attractive, according to RPM.
The main reasons behind the over-performance are that these managers may be active in smaller, less liquid markets, their often innovative trading models and the fact that collectively, the evolving managers offer better diversification opportunities.
“An important part of the over-performance occurred during the difficult late spring/early summer months, where the diversification benefits were especially apparent,” says Stenbom.
In June, two new share-classes, EUR and SEK, were added to the existing USD and CHF classes, and the fund was renamed to RPM Evolving CTA Fund (sicav). In November, the fund was made available to Dutch investors through a cooperation with Privium Fund Management.
“By structuring the RPM Evolving CTA fund as a fund of managed accounts, it is not only possible for RPM to have real time portfolio overviews, but also for investors like us,” says Mark Baak, director at Privium Fund Management. “The online reporting tool that RPM has created provides optimal transparency and monitoring possibilities. Changes in investor demand have dramatically increased the need for both this level of transparency and the daily liquidity of the product.”