IASG asked NFA registered CTA: Breakout Funds to explain (in their words) what gives them an edge over other CTA managers. Their diverse backgrounds in proprietary trading help them adapt to these changing market conditions.

The CTA space has struggled mightily over the past ten years. The industry has been rooted in trend following that worked well many years ago but has been choppy at best in recent years. The introduction of automated systems for some time provided profits. But again, these were generally based on trend following and back-tested on data no longer relevant in present markets.

A manager who knows how to take risks in modern markets is essential. To blindly follow a trend or follow an automated signal, at best, does not take advantage of the opportunity and, at worst, leads to blow-out risk.

Proprietary traders must be experts in extracting profits and managing risk. Adaptation is key. These markets have changed immensely over the past 15 years, and to survive those changes as a trader, you must evolve.   Whether it was the advent of algorithms, the financial crisis, HFT, the introduction of QE, or political effects, traders had to adapt. With all these changes, new skills are honed, and the trading style moves forward.

Given the proper market condition, traditional trend-following or automated systems may work for some time. Still, they cannot recognize change or adapt style, which modern markets require. The result has been choppy to negative returns in the CTA space.

We believe a CTA manager with a proprietary trading skill set, proven over time throughout various market regimes, is the necessary future of the industry. Trading proprietary firm capital under an SMA structure can have multiple benefits. This way, firms do not have the overhead and headache of bringing on a new trading team. Instead, both parties can focus on what they do best; trading and managing risk.


Breakout Funds is an independent proprietary-style trading shop operating as a CTA. The two founders, Matt Laviolette and Aaron Larkin, began trading at a proprietary trading firm, Black Diamond Capital, in 2003. After three years, Aaron traded his own book, and Matt remained as Partner. In 2015 we rejoined each other to run a fund based in Ohio. Having successfully managed the fund for three years, in 2017, they left to launch Breakout Funds on our own.

Our strategies are Global Macro Opportunity based. We have developed scalable systems using our skillset built over 15 years of proprietary trading and proven through quantitative research. First, we want to identify when high-risk reward opportunities exist and, even more importantly, when they do not. From there, we drill down intraday to determine the best risk-reward entry. Entering this manner, we can scale a position aggressively while keeping risk tight.   We feel our roots in proprietary trading give us an edge that other CTAs do not have.