I think everyone else has had a hack at this topic so perhaps I should through my 2 cents in as well. I am not speaking as a CTA or about CTA's necessarily just about system performance which is where we started with this I think (way back someplace).
From my observations obtaining a MAR ratio above 2 on a LTTF system for an extended period of time could be a challange for a number of reasons.
The MAR ratio is made up (I believe) of two main components.
1.The CAGR
2.MAX DD.
When these two parameters diverge the MAR increases (CAGR goes up and DD goes down). When they converge its bad news.
My observations here assume a constant CAGR of greater than 70% on balance and this should remain fairly static for the entire period under test.
Because CAGR has a time component in it, this plays into the reading you will get. The shorter the period of obeservations the less likely one is to hit a major problem in testing. Also if the trading account remains flat the shorter the time period under observation the better the MAR. On the flip side if the account does nothing for a while time will eat away at the MAR.
From my testing on relatively small sums of money when the account starts out the DD's are fairly low becuase the sums traded are low. If the system has a fairly high return this will play into the MAR as will the short time period calculated into the MAR and MAR figures above 3 are quite common. As the average level of DD rises upwards as the cash traded increases the MAR steadily erodes backwards and if the system is any good finds a happy medium until....
However since MAR looks at the MAX DD, sooner or later its going to hit a rock in the road, that will pull the overall MAR down. If you test over 20 years or longer that day will come. If one were to take the average DD figure instead of the MAX DD then the situation would be quite different because the big DD spike(s) would get swamped by a much larger volume of relatively lower DD figures. (How to apply makeup to the MAR)
If the CAGR is above say 70% and the MAX DD's are under 40% you should get a MAR of >2 . The problem is keeping the MAXDD below 40% with these levels of returns is difficult over 20 years (from my observations).
From my backtesting of a portfolio of around 30 futures markets over 20 years based on a LTTF system it is highly likely you will hit a spike that will deflate the MAR to below 2, a single event will do the job, thats all it takes.
If you test from 1994 onwards you may find the markets more favourable as someone mentioned. Of course it depends on what markets are traded and how many, but on balance things don't look to bad, which works against what people say about the 80's. One possible reason if you are seeing this, is that most markets currently trading or being tested over this period have all been on line for this period of time. Prior to this period some markets didn't exist. A lack of tradeble markets will not help a LTTF system at all, if the bet stratergy is fairly aggressive.
The other possible reason is that the system has to start someplace and slowly grab opportunities as the account grows. If the system takes a flying start and trades if the signal is present you will start with more markets traded and hopefully more uncorrelated markets which will help smooth volitility and improve the overall system perfomance. So again this might explain why taking observations since 1994 might look more favourable in some cases. Lastly there is a look back period where the system starts but nothing happens because you need so much data to feed into the system before the moving averages or breakouts etc. can come online, that in itself will erode MAR hanging around doing nothing for a year perhaps. These are more test related issues than CTA type issues.
So in conclusion the two components I see that seem to work against MAR are:
1. MAX DD
2. Time.
So to fudge figures, pick a short period of time with no nasty MAX DD spikes and you have a system that could easily beat a MAR of 2.
Merry xmas and best wishes for the coming year
Stephen