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JLN Managed Futures: Why Correlations Between Asset Classes Matter; Managed futures start second half of the year with strong performance; Asset managers promise to put clients first from now on


CTA Expo Update
Doug Ashburn – John Lothian News

Frank, Bucky and the CTA Expo team will be hosting their annual Chicago event September 17, 2015 at the UBS Center at 1 N. Wacker Dr. This event sells out every year, so sign up today.

There are currently over 225 industry professionals registered including 100 who have registered as capital sources and 33 participating CTAs. CTA registrations still start at just $500, Service Providers at $700 and Capital sources, including asset allocators, pool operators and professional clients, attend CTAExpo conferences for free. For what you get, the event is a bargain regardless of which category you are in.

The event features a number of panels specifically addressing the most pressing issues in the CTA space. Gerry Corcoran, CEO of R.J. O’Brien, kicks off the event with a look at the futures industry – “Where are we and where are we going.” Other panels cover institutional investors, family offices, the art of communication, due diligence and more.

As an added bonus, the day before the event, all registered traders are invited to attend a half-day program for new managers entitled “The Rules of the Game – Business Guidelines for Emerging Managers.” I will be co-hosting a session along with BarclayHedge president Sol Waksman on the effective use of media and databases in an emerging manager’s marketing plan. For more on this year’s program, click HERE

Hope to see you there.

Quantifying CTA Risk Management
Kathryn Kaminski – Campbell White Paper Series
CTAs often cite risk management as a key to their success. Despite this claim, the process for evaluating CTA risk management has remained somewhat qualitative. A new white paper by Campbell & Company, Quantifying CTA Risk Management, attempts to quantify CTA risk management by defining four risk management factors: liquidity, correlation, volatility, and capacity.

***DA: Take a look. Campbell has emerged as a sort of de facto spokesman for the CTA industry these past few years.

9 Things to think about before playing the Commodities Sell Off
Attain Capital Managed Futures Blog
Now, there are two kinds of people in the world. Those who look at the numbers above and want to ride the momentum lower and lower; and those who see the red above and start thinking about the inevitable bounce when the sell-off subsides and these markets start to rise. Do you Buy the Dip or Ride the Sell off Lower?

***DA: Try to catch a falling knife, or hitch a ride on the blade?

Lead Stories

Why Correlations Between Asset Classes Matter
Strategic allocation models typically carve out a portion of an investment portfolio for alternative investments, such as commodities, Hedge Funds, private equity or managed futures. These alternative asset classes can provide exposure to less correlated assets, theoretically increasing returns and lowering risks over the long term. Of course, investors are glad when these types of exposures are performing well and adding to their portfolio returns, but many have trouble understanding why they even own these assets when they are underperforming.

***DA: Not much difference between having one’s eggs all in one basket and allocating to numerous baskets that all ride to market in the same truck.

Managed futures start second half of the year with strong performance
Following a mixed first half of the year, CTAs returned to positive performance in July, according to the indices calculated by Societe Generale Prime Services. The Newedge CTA Index posted +3.01 per cent during the month of July, returning to positive year-to-date performance (+0.64 per cent YTD).

Asset managers promise to put clients first from now on
The Trade News
Members of the Investment Association have signed up to a Statement of Principles designed to ensure asset managers behave in the best interests of customers.

***DA: As opposed to before when they…didn’t? Unless the definition of “fiduciary” has changed since I took my exams, the client has always come first.

Worst-Hit Commodity Investments? Not Commodities
What is falling harder than commodity prices? Some exchange-traded funds that seek to track the companies that dig and drill for raw materials and fuel. It is no small feat to overshadow recent declines in industrial materials such as oil and metals. The Bloomberg Commodity Index, which tracks the prices of 22 raw materials, this week hit a 13-year low and is down 13% this year.

Billionaire Ken Griffin Might Bring Back The Hedge Fund IPO
By Nathan Vardi, Forbes
Billionaire Ken Griffin has rebuilt his Citadel, the Chicago hedge fund firm that nearly collapsed during the financial crisis and now manages $26 billion. Now, Griffin is once again thinking about taking his hedge fund firm public.

***DA: If Griffin is selling, I am not sure I want to be on the other side of that trade.

Managed Futures/Managed Funds

Hedge Fund Losses From Commodity Slump Sparking Investor Exodus
Bloomberg Business
When even Cargill Inc., the world’s largest grain trader, decides to liquidate its own hedge fund, that’s a sign that commodity speculators are in trouble. Hedge funds focused on raw materials lost money on average in the first half, the Newedge Commodity Trading Index shows. Diminishing investor demand spurred Cargill’s Black River Asset Management unit to shut its commodities fund last month. Others enduring redemptions include Armajaro Asset Management LLP, which closed one of its funds, Carlyle Group LP’s Vermillion Asset Management and Krom River Trading AG.

***DA: Remember the “massive passives” – evil speculators that Bart Chilton waned of while he was a CFTC commissioner? They would come in handy right about now.

Morgan Stanley joins forces with Swiss firm for fund launch
Morgan Stanley has teamed up with Swiss asset manager Quantica Capital to launch a new fund to provide exposure to Quantica’s managed futures strategy. The Quantica Managed Futures UCITS fund aims to generate attractive risk-adjusted returns by identifying medium-term trend-following market inefficiencies in diverse and liquid sectors.

Hedge fund inflows hit 15-month high – data
Investors raised their bets on hedge funds at the fastest pace for 15 months in August, new data showed.

Bank of America Pulling Clients’ Money From Paulson Fund
by Katherine Burton, Hugh Son, Bloomberg
Bank of America Corp. is pulling its wealthy clients’ money from one of billionaire John Paulson’s hedge funds and reviewing another because of concern that large positions may be hard to sell.

***DA: Too big to hold.

Alts: Taking the Plunge, Dipping a Toe, or Taking a Pass?
Some Morningstar readers are intrigued by alternative investments, but high fees and lack of understanding remain barriers to adoption.

Pensions & Institutions

A How-To Guide for Opening Your Own Wealth Management Firm
Margaret Collins, Bloomberg
Since 2007, only one segment of the wealth management industry has boosted its market share every year: independent advisory firms. They’ve more than doubled their assets in that time, overseeing about $2.7 trillion as of 2014. And there’s room for growth. According to an estimate by Boston Consulting Group, a total of $46 trillion in private wealth is up for grabs in the U.S. We asked several independent investment advisers, many of them former brokers, about setting out on their own. Here’s their advice.

***DA: Step one: Get a bunch of rich clients. Step two: Make them lots of money.

Norway’s sovereign wealth fund urges exchanges to adapt
Philip Stafford, FT
Norway’s sovereign wealth fund, one of the world’s largest equity managers, has argued that stock exchanges are growing increasingly unsuited to modern trading because of the growth of institutional investment.

Derek Pain: ‘AIM may be the market’s wild child – but at 20 it’s a survivor’
The Independent
The Alternative Investment Market is frequently seen as little more than a casino but it has enjoyed many successes

Where is the Money Going? – State’s Giant Pension Funds Lost $5.2 Billion in Fossil Fuel Investments
AllGov California
It has been a 12 months in the market for fossil fuel investors. Oil alone lost around $1.3 trillion. Public institutions that bent to the will of alternative energy supporters clamoring for divestment saved a lot of money. That would not include the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). The 2.6 million members lost $5.2 billion, according to a report from Trillium Asset Management for, two eco-friendly organizations

Global alternative assets reach 15.3 trillion by 2020
In a recently released report from PwC, the accounting and consulting giant analyses the state of the assets management industry, and considers changes to the investment market that are seeing alternative asset classes rise in popularity*. The majority of analysis is based on IMF economic growth predictions, and the firm’s hypotheses and modelling for the period 2015 – 2020.


Wetjen to leave CFTC after five-year stint
The Trade News
Mark Wetjen has announced he will step down from his role at US derivatives regulator the Commodity Futures Trading Commission (CFTC) at the end of the month.

***DA: Back to two vacancies to fill on the 5-member commission.

NFA grants Form PR reporting relief to certain CTAs
Katten Muchin Rosenman LLP
National Futures Association (NFA) has notified its member commodity trading advisors (CTAs) that do not direct trading of commodity interest accounts that they are no longer required to file NFA Form PR under NFA Compliance Rule 2-46. This relief, which is consistent with recent no-action relief issued by staff of the Commodity Futures Trading Commission in CFTC Letter No. 15-47, is effective immediately and applies to the June 30 Form PR filing.

AQR trading head fired after SEC case against former employer
By Bradley Hope, The Wall Street Journal
Hitesh Mittal has been terminated from his position as head of trading at AQR Capital Management in a move related to an enforcement action the Securities and Exchange Commission brought against a former employer.

Fund Caught in Snare of Global Probe; Kijani fund, seized by regulators in Cayman Islands, spotlights risks in lightly regulated market
On this tiny Mediterranean peninsula, a hedge fund run by a polo player has been seized by regulators, as part of a global probe into offshore funds, highlighting the risks lurking in this lightly regulated, multibillion-dollar market.

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About Author

Doug Ashburn is a former editor-at-large of John Lothian News. He left in late 2016 and is now the managing editor of T3 Custom.