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Performance Perspective

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It is part of human nature to be overconfident with our own ability.

In order to create some perspective for traders who think they can deliver 5 or 10% monthly performance returns I have included the aggregate performance of the best traders making up the highly reputable Barclays CTA Index, going back as far as 1980. Criteria for inclusion being the registered advisor (“CTA”) has to have a 4yr track record, this helps eliminate short term track records which tend to distort performance with artificially high returns (index distortion is a subject for another post).

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What you can learn from the above chart and table of performance is that with over 35yrs of data measuring the top traders in the world, their aggregate performance averages a 10% annual return with a Sharpe Ratio of 0.38

With this in mind when forecasting your future performance it would be wise to take these numbers into consideration and ask yourself, am I really one of the best traders in the world? If you do believe that you are then you would be wise to use the above averages to calibrate your performance projections, thus sprinkling your forecasts with a healthy dose of reality.

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