Uncorrelated to other CTAs

The inclusion of Brandywine’s Symphony program in a managed futures portfolio both increases returns and decreases risk. Before we present the results, because the results presented here include both ACTUAL performance (beginning July 2011) and tested performance, the following hypothetical disclaimer is required:

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

Consistent Returns & Non-Correlation to Other CTAs

Brandywine’s Symphony managed futures program incorporates multiple fundamentally-based trading strategies, trading across more than 100 futures markets. The result is returns that are uncorrelated to other CTAs. Brandywine’s investment philosophy is also based on the belief that employing a repeatable systematic trading methodology across a diversified balanced portfolio will produce the most predictable and consistent performance.

Example of Non-Correlation

Brandywine’s Symphony program produces profits during negative periods for the Barclay Hedge BTOP 50 managed futures index. Over the past 22 years the BTOP 50 suffered 34 peak-to-trough drawdowns that averaged -4.3%. During those periods, the tested performance for Brandywine’s Symphony program gained an average of +0.6%. The (non-)correlation of Brandywine’s performance to that of the BTOP 50 during those periods was -0.03.

Because Brandywine’s Symphony program profits when the BTOP 50 index loses, the inclusion of Brandywine’s Symphony increases returns and decreases volatility and drawdowns. The table and graph below show the improved performance that results from allocating 50% to Brandywine’s Symphony and 50% to BTOP 50.

Comparison: BTOP50 Alone & 50% BTOP50, 50% Brandywine
	BTOP 50	50-50
Years	21 1/2	21 1/2
Average Annual Return	7.55%	9.95%
Annualized Volatility	9.39%	7.70
Maximum Drawdown	-13.31%	-7.79
% Profitable Months	57%	63%
% Profitable Rolling 12-month	86%	95%
% Profitable Years	90%	90%

Actual Performance: 2011

This tested non-correlation continues today with the actual trading of Brandywine’s Symphony. Since the launch of Brandywine’s Symphony program in July, the BTOP 50 index has declined (it is currently in a -4.5% drawdown that began in May), while Brandywine’s Symphony program has gained 7.90%. The result is that the 50-50 portfolio is profitable while the BTOP 50 shows a loss.

Comparison: BTOP50 Alone & 50% BTOP50, 50% Brandywine
	BTOP 50	50-50
Years	7/12	7/12
Average Annual Return	-0.26%	7.02%
Annualized Volatility	4.49%	3.41
Maximum Drawdown	-2.63%	-1.43
% Profitable Months	71%	86%
% Profitable Rolling 12-month	N/A	N/A
% Profitable Years	N/A	N/A

Brandywine’s use of fundamentally-based (but systematically-applied) non-correlated strategies also results in similar diversification benefits when applied against both other CTAs and equity portfolios (see: Uncorrelated to Stocks). Let us know if you’d like us to run a report that shows the benefit of incorporating Brandywine’s Symphony program in your portfolio.