The Benefits of Compounding Returns in Managed Futures

A lot of CTA's tend to have a high standard deviation, but you really have to ask, where does that volatility come from? A lot of it comes from the upside, the positive skewness. So when you plug a CTA into a sharp ratio, they get penalized for having that high standard deviation. Yet it's actually coming from their positive returns, not from their negative returns. And that's the part that's misunderstood. I sometimes feel like those in the managed futures space, often they've been so trained to talk about the disclaimers and whatnot,.

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