Conference Season Open
There are a couple of events coming to Chicago next week. CTA Expo will be held at the UBS Tower in Chicago on September 23. I will be there as well, on one panel titled “Public Relations And The Press….Building A Foundation For Effective Capital Raising” and another breakout session talking about the value of video in your marketing. Space is always limited, so sign up now. The keynote speaker this year is Leo Melamed, an always insightful and provocative orator. http://ctaexpo.com/chicago/
Secondly, is the National Introducing Broker Association (NIBA) Conference on September 22, at the CBOT Building, 141 W. Jackson Blvd. You can sign up here – http://jlne.ws/1uOALP8/.
And the granddaddy of them all, the FIA Expo, will be held in Chicago on November 4-6. You can register here – http://jlne.ws/1uDJm7V.
Trend-following hedge funds’ future in doubt
Trend-following hedge funds’ numbers dropped for the first time since 2005 as investor outflows continue to take their toll on the strategy after years of poor performance.
The liquidation of 156 CTAs, hedge funds that tend to follow trends in futures markets using computers to place bets, marks the first time in almost a decade that the number of funds in the sector has declined, according to figures from Eurekahedge, the data provider.
**JK – When the trend ain’t your friend.
CFTC Eases Hedge-Fund Advertising Ban
WASHINGTON—U.S. commodity regulators took long-awaited steps to make it easier for hedge funds and other firms to raise cash by publicly advertising stakes in their funds.
The Commodity Futures Trading Commission late Tuesday eased long-standing marketing restrictions on so-called private offerings by hedge funds and other funds sold only to wealthy investors, a move aimed at aligning the CFTC’s restrictions with similar rules set by the Securities and Exchange Commission.
**JK – I sat on a panel almost two years ago at the Emerging Manager Forum in Miami and was the lone dissenter on the potential boon in hedge fund advertising. I didn’t expect much from this sector, which was met with some skepticism from my fellow panelist who thought advertising and marketing bucks would flow. This may help, but the spotlight wary hedge fund community must change its mindset to being more public.
New CME Rule 575 – Disruptive Practices Prohibited – Effective Today
CME Group Press Release
This Revised Market Regulation Advisory Notice supersedes Market Regulation Advisory Notice RA1405-5 originally issued on August 29, 2014. Subsequent to discussions with the Commodity Futures Trading Commission (“CFTC”), CME, CBOT, NYMEX and COMEX are making minor modifications to three of the Questions & Answers in this Advisory Notice
CTAs bounce back to post positive performance in August, says Newedge
Following a tough month for returns in July, all managed futures indices calculated by Newedge reported positive performance in August. The strong month means that all Newedge managed futures indices are also now in positive territory for 2014 YTD.
Will Smart Betas Make Hedge Fund Managers Obsolete?
Video interview with Mark Anson, talking about smart beta – and pressures on hedge fund managers today.
Marc Malek, Conquest Capital Group
“People are fond of saying: ‘we are 100% systematic.’ And when you say you’re 100% of anything, it tends to make people nervous.” – Marc Malek (Tweet)
This guest had a different path that eventually led to owning a hedgefund in New York. Marc Malek got a grant from NASA to study how different armored tank positions would lead to winning results on the battlefield. Traveling to Wisconsin to begin his research, his advisor steered him to do a similar project on stocks, bonds, and equities instead. He went on to work for UBS and finally founded his own firm, Conquest Capital Group. His story will fascinate and inspire you.
Most Hedge-Fund Managers Are Overpaid, Unigestion Says
Klaus Wille – Bloomberg
Nine out of 10 hedge-fund managers are overpaid as management fees don’t reflect declining interest rates and fund returns, according to Unigestion Holding SA, which invests $2 billion in hedge funds.
Why managed futures aren’t getting the job done
Jeff Malec in InvestmentNews
Most advisers got involved in managed futures after stocks performed poorly in 2008. But they walked right into another poor market environment, this time for managed futures themselves. While they don’t make the headlines as much, managed futures as an asset class are in crisis now, reminding many investors of the “generational low” terminology used by the stock folks circa 2009. The main managed-futures benchmark indexes are all close to five-year lows and sitting just above their worst drawdown levels in the past 15 years, at 38 months and -12.58%, respectively, from their past all-time highs.
Derivatives World China: The International Options Forum
16 September, Shangri-La, Dalian, China
With options set for launch in China this year, now is the time to find out how you can take advantage of this once in a lifetime opportunity to be there at the start of the market.
Join over 300 key figures from the global futures and options markets for high level discussions on the latest developments, opportunities, challenges and future direction of the options market in China and around the world.
To view the agenda, click HERE
To register for the event, click HERE
5 Ways to Prepare Yourself for Retiring in a Bear Market
U.S. News & World Report
It may come as a surprise, but we have been experiencing a bull market for the last several years. However, with the recession memories still fresh in people’s minds and suggestions of potential downside to come, many are asking, “What happens if I retire in a bear market?” These are the key implications of retiring in a bear market.
***DA: Step one – sell before the bear market starts.
The Wall Street and Washington DC Revolving Door
Tim Quast – Traders Magazine Online News
Did the Founding Fathers imagine a world where former politicians and regulators would cross the aisle to work for the same firms they once managed and regulated?
From out here on the fruited plain looking at Washington D.C. and New York City, you could conclude that things are cozy between the rich and powerful.
Former Commodity Futures Trading Commissioner Bart Chilton joined white-shoe law firm DLA Piper. Former Senate staffer Kara Stein is at the SEC. Ousted electorally as House Majority Leader, Eric Cantor is now vice-chairman of investment bank Moelis & Co. without ever having the burden of working at a banking job. Modern Markets Initiative, which lobbies for high-speed trading, hired Bank of America and NASDAQ OMX exec Bill Hartley and staffers from the Obama and Romney presidential campaigns. A top lawyer at the firm that counsels us was a longtime congressman from Texas.
Managed Futures/Managed Funds
Revenge of the active manager
One should always present both sides of the case. A recent briefing highlighted the rise of passive investing, exchange traded funds and “smart beta” and the threat they represent to active managers, those who charge higher fees because they say they can beat the market. And a column focused on a recent study showing that even experienced active managers cannot be relied upon to beat the market.
How to Raise Billions in a Matter of Weeks
Juliet Chung – MoneyBeat – WSJ
What does it take to raise scads of money, quickly? A halo of limited capacity on the part of a hedge-fund and the prospect of fat returns don’t hurt.
Hedge fund assets up 15% on big inflows, strong returns
A combination of solid performance and broad-based inflows pushed asset growth of hedge fund and hedge funds-of-funds managers well into positive territory for the second consecutive year.
Hu gives lecture on financial paradox
The Johns Hopkins Newsletter
Xiaohau Hu, chief research officer and co-chair of Campbell & Co., a Baltimore-based investment firm, gave a talk entitled “Two Envelopes, Siegel’s FX Paradox, and Currency Hedging.” In his Tuesday presentation in Whitehead Hall, Hu explained the similarity between a theoretical paradox and the real-world phenomena that occur in the financial sector. The room was packed with both graduate students and professors.
***DA: Hu was followed by a guy named Watt. Ida Know was third.
Hedge funds see fund admin offering divergence
Luke Clancy – Risk.net
A survey carried out by Hedge Funds Review’s sister title Custody Risk of hedge fund administrators with a collective $2.2 trillion in assets under administration shows the sector to be in rude good health. In the crucial hedge funds business, almost all administrators saw robust double-digit increases in assets entrusted to them.
Fewer hedge funds, but assets still growing
A review of data from 11 commercial hedge fund databases shows the number of active and reporting hedge funds fell to 7,524 in 2013 from 8,013 in 2012 – a drop of around 6%.
Numerous factors can cause declines – the most prevalent being the real-time realisation of terminating funds versus the delay in new fund launches reporting to commercial datasets.
BlueBay, Hedge Funds Take On Asset Managers for UCITS
Sarah Jones – Bloomberg
Hedge-fund firms such as BlueBay Asset Management LLP and Brevan Howard Asset Management LLP are jumping on demand for liquid alternative investments, offering funds usually reserved for traditional money managers.
Pensions & Institutions
Pension funds struggle with Emir deadline
Despite being granted an exemption from Emir until 2017, pension funds are already being indirectly affected and are belatedly working to develop new arrangements
Pension schemes have won a reprieve from the European Commission to extend their exemption from centrally clearing over the counter (OTC) derivatives under European Markets and Infrastructure Regulation (Emir) to a palpable sense of relief.
San Francisco Delay Hedge Fund Vote Again
The San Francisco City & County Employees’ Retirement System is punting on its potential maiden hedge fund foray once again. The $20.6 billion public pension delayed a vote on a planned $3 billion hedge-fund allocation for the second time last week, Pensions & Investments reports. The board first put off a vote in June.
Goldman Hired to Manage $2 Billion of New York Public Pension Fund
NATHANIEL POPPER – Dealbook – NY Times
Goldman Sachs got its largest-ever assignment to manage money for New York State’s largest pension fund.
Pimco Steps Up Alternatives Push
Andrew Pearce – MoneyBeat – WSJ
Pimco’s stepping up its expansion into alternative investments. The giant U.S. fund manager has relocated a structured credit specialist to London and hired a team of real estate experts from large investment banks, as part of the bond giant’s latest diversification play.
Public Pensions Are Still Marching To Their Death
Public employee pension systems have long been a source of problems. State government politicians are continually tempted to underfund pension plans in favor of using that money for something with an immediate payoff. Those same politicians also tend to grant increased pension benefits to state employees because it is a simple vote-buying scheme with no immediate budgetary cost. However, a sign of how bad the morass of public pension funds has become is that most of them have become more underfunded in the past five years. If public pensions get more underfunded in years with positive stock market gains, what hope is there for their survival?
Higher yields, without increased risk
In the rebound of the financial markets from the great financial collapse of 2007-’08 to recent highs, today’s institutional investment managers are now in an unenviable position: remain invested in equities that are at peak historical measures of value or rebalance their portfolios into low yielding fixed income. Facing a continuation of a yield-starved, low-interest-rate environment, traditional fixed-income investments no longer deliver sufficient yield along with the predictability and stability instituti
Bridging the Week: Exorbitant Fines; Lawyer Sued by CFTC; New CFTC Chairman’s Early Views; AML
Gary DeWaal – Katten Muchin Rosenman
Bad facts may make bad law. As a result, many lawyers are eagerly awaiting the outcome of a federal lawsuit by the Commodity Futures Trading Commission against a lawyer for purportedly aiding and abetting his clients’ unlawful off-exchange metals transactions. The CFTC also took the spotlight this week when its new chairman testified before the Senate Banking Committee, providing some initial views on what he thinks should be the agency’s priorities, as well as when its enforcement division brought and settled an administrative action against an introducing broker for not following its own anti-money laundering procedures.
Treasury Is Weighing Action on Hedge-Fund Tax ‘Loophole’
Zachary R. Mider – Bloomberg
The U.S. Treasury Department said it’s considering ways to end a “loophole” that allows hedge-fund managers to avoid taxes by routing their investments through an insurance company in low-tax countries like Bermuda.
U.S. regulator would welcome delay of EU clearing rules
Douwe Miedema – Reuters
A top U.S. regulator said on Wednesday he would welcome a delay by the European Union that gave more time to resolve a conflict with Washington over making derivatives markets safer.
***DA: Recall that, in Europe, it is not just OTC derivatives under the new umbrella, but also listed derivatives as well.