Winton Capital: the relationship between return, leverage, and drawdown

Winton believes not in minimizing risk, but in targeting it. A trading scheme such as Winton’s can be operated at any level of volatility simply by varying the margin to eqity ratio employed. A higher margin to equity ratio will produce a higher compound rate of growth at the price of higher drawdowns. A lower margin to equity ration will feel safer but more of the investors money will be underutilized.

Winton operates its core futures program at a margin to equity ratio averaging about 20%, which generates trading returns with annualized volatility of 20-25%.

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