Key Takeaways
- • A wealth management advisor has launched a live rules-based trend following program across 41 diversified futures markets (equities, fixed income, currencies, energies, metals, agriculture, softs, and livestock) after being influenced by systematic trend-following literature and strategy frameworks.
- • The strategy architecture combines Donchian breakout mechanics with filtered entry confirmation, risk-sized at 1% per trade via ATR, with graduated drawdown circuit breakers that scale exposure during equity declines and enforce a hard 35% halt level.
- • Backtested performance (2007–2024 on Norgate continuous contract data) shows a 10.95% CAGR, 1.12 Sharpe ratio, 2.28 Calmar ratio, and -4.79% maximum drawdown, with a 46% win rate and 6.45x average win-to-loss ratio.
- • The manager is seeking validation on whether the backtest results reflect genuine edge or represent fortunate outperformance during the 2008–2022 macro regime when trend-following strategies historically performed well.
Summary
A former wealth management advisor has transitioned to running a systematic trend-following program after concluding that traditional wealth management approaches are fundamentally misaligned with the historical return profile demonstrated by rules-based trend following over the past century. This shift reflects a broader recognition within the advisor community that passive and traditional active management frameworks may underdeliver relative to structured, systematic alternatives.
The newly launched program operates across 41 diversified futures markets spanning asset classes including equity indices, fixed income, currencies, energy, metals, agricultural commodities, softs, and livestock. The strategy architecture sits between classical Donchian breakout systems and more sophisticated second-generation CTA approaches. Entry requirements include a defined consolidation range breakout followed by directional confirmation before position initiation. Risk management is implemented through 1% per-trade equity sizing based on Average True Range (ATR), supplemented by graduated drawdown circuit breakers that progressively reduce exposure as equity declines, with a hard stop at 35% cumulative drawdown. The framework also incorporates sector concentration caps and a forced maximum adverse excursion exit at 2% of net asset value.
Backtested results across the 2007–2024 period (using Norgate continuous contract data) report a compound annual growth rate of 10.95%, a Sharpe ratio of 1.12, a Calmar ratio of 2.28, a maximum drawdown of -4.79%, and a 46% win rate with an average win-to-loss ratio of 6.45x. These metrics represent performance characteristics that would satisfy many institutional allocators focused on risk-adjusted returns and downside protection.
The manager's critical question centers on pattern recognition and regime-specific performance: whether the backtested profile reflects a durable edge or represents fortunate outperformance during the 2008–2022 macro environment when trend-following strategies historically generated outsized returns due to sustained directional moves in commodities, equities, and fixed income.
The newly launched program operates across 41 diversified futures markets spanning asset classes including equity indices, fixed income, currencies, energy, metals, agricultural commodities, softs, and livestock. The strategy architecture sits between classical Donchian breakout systems and more sophisticated second-generation CTA approaches. Entry requirements include a defined consolidation range breakout followed by directional confirmation before position initiation. Risk management is implemented through 1% per-trade equity sizing based on Average True Range (ATR), supplemented by graduated drawdown circuit breakers that progressively reduce exposure as equity declines, with a hard stop at 35% cumulative drawdown. The framework also incorporates sector concentration caps and a forced maximum adverse excursion exit at 2% of net asset value.
Backtested results across the 2007–2024 period (using Norgate continuous contract data) report a compound annual growth rate of 10.95%, a Sharpe ratio of 1.12, a Calmar ratio of 2.28, a maximum drawdown of -4.79%, and a 46% win rate with an average win-to-loss ratio of 6.45x. These metrics represent performance characteristics that would satisfy many institutional allocators focused on risk-adjusted returns and downside protection.
The manager's critical question centers on pattern recognition and regime-specific performance: whether the backtested profile reflects a durable edge or represents fortunate outperformance during the 2008–2022 macro environment when trend-following strategies historically generated outsized returns due to sustained directional moves in commodities, equities, and fixed income.
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