About Covenant Capital Management, LLC. – CCM Original Program

(+CCM Aggressive)
Summary: The CCM Original Program is a long-term, 90% systematic, trend-following program. If discretion is ever used it is only for risk management purposes and would be to opt out of entering a trade when a signal is given. No discretion is taken by the traders for trade decisions. Average trade length for winning trades is approximately 270 calendar days but can range from 3 months to two years. Trade length for losing trades is approximately 40 calendar days but can be less than one day. Average margin usage ranges from 15% to 18%. Margin has not spiked higher than 22% in the Original Program. Generally between $150K and $200K is traded as $1MM for the Original Program. The Aggressive Program is identical to the Original Program with the exception of leveraging. The Aggressive Program generally trades $1MM as $1.7MM and average margin usage is 25% but may spike to 50% in the Aggressive Program. What they believe sets them apart from other trend-followers is that they exit losing trades very quickly and that they trade less frequently (approximately 1600 to 1800 round turns per million). Products traded include metals, meats, grains, energies, softs, foreign currencies, domestic and foreign interest rates, and domestic and foreign stock indices outright futures. Stops are initiated upon trade entry and are modified weekly to trail. The system allows only one trade per week in a given market and risk percentages are fixed based on assets at initiation. The largest intra-month drawdown has been approximately 16%. Fee structure is 0-4%X20%. Minimum managed account size is $500K. AUM is estimated at $185MM. Both principals can trade the program independently.

From DDoc:

Original Program:
CCM takes positions based on a long-term, technical, trend following system created by Mr. Billington and Mr. Wilford. Discretion is used only in extremely rare cases to interpret the existing rules of the system. Technical analysis uses the theory that a study of the markets themselves will provide a means of anticipating price changes. The system attempts to participate in long-term market trends. It does not try to predict trends. The system does not try to predict when a trend will start, how long it will last, or how high or low it will move. After a trend has occurred, CCM does not seek to explain why a trend may have occurred or why it behaved as it did. The only prediction made is that trends will continue to exist as a phenomenon of the market place.
CCM can only recognize a trend after some, most or all of it has already occurred. The system identifies when a trend may be beginning and enters the market at that point. The same technical analysis indicates when the trend may be ending, and signals to exit the market at that point. The system is set up to minimize commissions and the number of trades per market when compared to other futures trading systems. Stop losses will be placed in the market as soon as entries are made, and they will be modified weekly. The system does not allow more than one round turn trade a week in a given market. Initial risk will be limited to a fixed percentage of the core equity (core equity is the total equity in the account less the total amount at risk in other open positions) of the account. As profits accumulate in a position, a greater percentage of risk will be tolerated; however, at a constant pre-determined level, CCM may use options or may decrease the position size to reduce risk. Exits are executed on trailing stops. Position size may be dramatically reduced to lower risk, but a position will not be exited until the market hits the predetermined trailing stop level. CCM may use multiple triggers to enter and exit a position incrementally and at different times. CCM trades a diverse portfolio of markets and market sectors including but not limited to, metals, meats, grains, energies, softs, foreign currencies, domestic and foreign interest rates, and domestic and foreign stock indices. By broadly diversifying across a wide array of markets, CCM attempts to diminish the importance of any one position in the portfolio. The individual positions are designed to be relatively small and the stops are designed to be relatively wide to avoid multiple entries and exits that increase the commission burden on an account. Larger initial risks per contract minimize the effects of large gap moves through the stop levels as a percentage of the original risk. Clients should expect annual drawdowns of at least 10-15% in this program.
CCM conducts continuing research to improve its trading methodology and risk management parameters. Markets may be added to or subtracted from the portfolio. CCM may make changes to its investment strategies without notifying current investors.
This program began trading September 1, 1999 with both proprietary and client funds.

Aggressive Program:
This program will take the exact same trading signals as the Original Program; however, it will take roughly 1.75 times the position size than the same account would take in the Original Program. This will result in considerably larger swings in account equity. This program has lower minimum account sizes. Participants in this program must be prepared for larger draw downs and nearly twice the volatility of the Original Program. This program began trading in January of 2004.

For more information or to request a disclosure document please contact your representative at Managed Capital Advisory Group, Ltd. This report does not take into account the investment objectives, financial situation, or particular needs of any particular person. Investing in securities and other financial products entails certain risks, including the possible loss of the entire principal amount invested. Certain investments in particular, including those involving structured products, futures, options, and other derivatives, are complex, may entail substantial risk, and are not suitable for all investors. The price and value of, and income produced by, securities and other financial products may fluctuate and may be adversely impacted by exchange rates, interest rates, or other factors. Prior to effecting any transaction in options or options-related products, investors should read and understand the current Options Clearing Corporation Disclosure Document, a copy of which may be obtained on request from your Managed Capital Advisory Group, Ltd. representative. Certain securities may not be registered with, or subject to the reporting requirements of, the US Securities and Exchange Commission or any comparable regulatory authority. Information available on such securities may be limited. Investors should obtain advice from their own tax, financial, legal, and other advisors and only make investment decisions on the basis of the investor’s own objectives, experience, and resources