Discussions concerning why CTA's have not done well over the last three months or over any period often takes a similar form. Invariably someone will say, "There were some big market moves in individual markets. I saw them on a chart. Why didn't you make money?" Or, "Look at the move in soybeans and crude. CTA's should have done better." This has been an issue since my earliest days in managed futures.
Given the diversification issue, high performance is only achieved if there is a strong move within a sector not just a single market or two. For managed futures, high performance needs the correlation of a few trends.
One of the methods employed to help with diversification is through using VaR to size trades. Many managers have stopped using old methods like sizing with fixed contracts per million for methods based on the volatility of markets. Weighing by VaR means that the more volatile markets will have have smaller positions sizes. The markets that may have the widest range of prices will have lower exposures and those with lower volatility will have higher exposures.
Risk may be constructed to be the same but the opportunities may be different. In the case of trend-followers, it is question of whether trends are more likely in volatile or calm markets. If the chance of a trend is the same, this sizing approach may not matter. If trends are more likely in volatile market conditions, returns opportunities will not be the same.
Program performance good or bad can not usually be extrapolated from the behavior of a few markets no matter how strong the trends. Performance is driven by good market choices that are often correlated within a sector.