Quote of the Day

“One of the problems of indexing is volatility. Holding the index and riding the volatility may breach risk management guidelines for some investors. So a pension fund, for instance, may sell the index when it falls by a certain amount, crystallise losses at the bottom of the market and buy in again at the top.”

-Randall Dillard, chief investment officer of Liongate, a fund of hedge funds in FT’s story: “Investors wary of volatility after losses.”

Upcoming Events
The center of the CTA/Managed Futures universe will be in New York this week. On Wednesday, the National Introducing Brokers Association holds its one-day sales and marketing conference. Thursday is the sold-out CTA Expo New York. Both events will be held at the NYMEX Building. John J. Lothian & Co. is an official media sponsor of the CTA Expo series, which includes the London Emerging Manager Forum in June, CTA Expo Chicago in September and, new this year, CTA Expo Miami in December. JLN Managed Futures will be providing periodic updates as they become available.

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CME Group/BarclayHedge Announce “Managed Futures Pinnacle Awards”
BarclayHedge
CME Group and BarclayHedge proudly present the first and only awards event to recognize excellence exclusively in the managed futures space. On June 11, the Managed Futures Pinnacle Awards will honor the top managers in the industry today, and provide opportunities for managers to meet new investors.
http://jlne.ws/HCICqz
**JK – Once you reach the Pinnacle, however, where else do you go?

Gate 39 Media Launches Online Managed Futures Portfolio Management Tool—Clarity Portfolio Viewer
Press release
For futures brokers and FCMs, the Clarity Portfolio Viewer provides access to an individual investor’s performance as well as the firm’s managed futures investments. Brokers and FCMs can view the amount of funds they manage in both dollars and number of accounts, program allocations, sales information, and more.
http://jlne.ws/HCtjhJ
**JK – Having had a look at it, this is a very clean dashboard-type of tool that investors would appreciate and is a value-add for FCMs and IBs.

Managed Futures Make Tax Time a Little Easier
Attain Capital Management
While the average American detests this day, investors surveying their gains and losses often abhor the date even more as they compile statements to find their cost basis and take a look at the taxes they owe. However, the pain endured in the payment of taxes can differ greatly, depending on the kinds of investments you hold. Turns out, if you’ve invested in managed futures, you may be letting out a sigh of relief… unlike your stock investing counterparts.
http://jlne.ws/HHH4ue
**DA: The good-ol’ 60/40 split. Thank you, Dan Rostenkowski.

Hedging the downside risk of your portfolio
TODAYonline
“Manage the downside and the upside will take care of itself” – so says Warren Buffett. This statement is important, notably in light of studies that show staying in the market – or spending time in the market – is more important than market timing. However, while staying invested, there will be periods of significant volatility and downside. Hence it is important to recognise it, understand why it is there and, most importantly, manage it.
http://jlne.ws/IyFIRG
**DA: The article, written by Standard Chartered’s Jeffrey Ong, plugs CTA strategies as a way to manage volatility, protect against inflation, and diversify holdings.

Managed Futures Scorecard   4/16/2012
     
Newedge Indices MTD Return YTD Return
Newedge CTA Index -0.67% -1.19%
Newedge CTA Trend Sub-Index -0.92% -0.64%
Newedge Trend Indicator -2.32% -3.64%
Newedge Short-Term Traders Index 0.15% -2.16%
     
Barclay Indices MTD Return YTD Return
Barclay CTA Index   -0.19%
Barclay UCITS Index   5.80%
Barclay Hedge Fund Index 0.18% 5.68%
BTOP FX Index 0.45% 0.94%
Morningstar Long/Short Com. Index 1.34% 3.63

Lead Stories

Investors wary of volatility after losses
FT.com
Increasing demand by institutional investors for commodities exposure has been a feature of the investment landscape over the past decade. As well as the widely accepted commodities supercycle narrative, investors see the asset class as a way of reducing portfolio risk.
http://jlne.ws/HMA594
**That story, follows this one below…

New style commodity indices underperform
FT.com
“Second-generation” commodity indices, touted by bankers as a way to make extra money from the relatively new asset class, have failed to outperform the most basic investment products this year.
http://jlne.ws/HZRJTT
**And this…

Hedge funds cut commodity exposure to four-month low
HedgeCo.Net
Hedge funds and other money managers slashed their exposure to US commodities by around $9 billion this week, government data showed over the weekend, in the biggest such cut in four months on worries over China’s slowing economy and fading prospects for new US economic stimulus.
http://jlne.ws/Igovzz
**JK – And this.

Hedge Funds Take in $6.8 Billion in February, but Returns Still Lag S&P 500
BarclayHedge
Funds of Funds See Inflow Amid Disappointing Returns. Most Hedge Fund Managers Believe Fed will Raise Interest Rates Before 2014. Neutral Outlook on U.S. Stocks Rises Sharply. Bearishness on U.S. Treasuries Doubles “BarclayHedge and TrimTabs Investment Research reported today that hedge funds took in an estimated $6.8 billion in February, reversing a trend that saw more than $21.5 billion flow out of these funds in January 2012 and December 2011, the largest outflows since July 2009.
http://jlne.ws/IsqMsO
**DA: And, finally, this.

Commods funds face Q2 dilemma as recovery stutters
Reuters
Commodity managers who performed well in the first quarter with tilts to oil and industrial metals remain bullish going into the second quarter but are prepared for rapid repositioning given the uncertainty around China, Iran and strategic oil reserves.
http://jlne.ws/ISBoyB

Bill Gross’s New ETF Roars Out of the Gate
WSJ.com
Bill Gross, the co-chief investment officer and founder of Pacific Investment Management Co., recently pulled off an unusual feat: He beat his own performance.
Mr. Gross’s new actively managed exchange-traded fund, the Pimco Total Return ETF, returned 2.52% from its Feb. 29 launch through April 12, according to investment-research firm Morningstar MORN -0.03% .
http://jlne.ws/HMrtOC

Despite their rep, hedge funds disappoint
HedgeCo.Net
A truly amazing phenomenon is the continued popularity of hedge funds, especially among high net worth investors. Despite the historical evidence on their lousy performance (as presented in my book “The Quest for Alpha”), hedge funds continue to attract great attention.
http://jlne.ws/Igpv6E

April Hedge Fund Inflows Advance 0.35%
HedgeCo.Net
Hedge fund flows as measured by the GlobeOp Capital Movement Index advanced 0.35% in April.
Outflows tend to be seasonally higher at quarter ends as investors rebalance their portfolios,” said Hans Hufschmid, chief executive officer, GlobeOp Financial Services (LSE:GO.). “Despite this, net flows for April were slightly positive.” http://jlne.ws/IgnvLC

HedgeCo Networks Names Former UBS Managing Director Brett Langbert as President and COO
HedgeCo.Net
HedgeCo Networks (HedgeCo), the pioneering hedge fund database and advisory firm, today named Brett Langbert President and Chief Operating Officer. Langbert, who spent 17 years on Wall Street covering hedge funds across a multitude of sectors and strategies, was most recently a managing director at UBS, responsible for the firm’s prime brokerage sales for the Americas.
http://jlne.ws/IZLrWv

Managed Futures/Managed Funds

What Is Contango?
Seeking Alpha
When it comes to commodity investing and trading, contango is a dirty word. Many investors have given contango a bad name (and rightfully so) as it has the ability to destroy value in an underlying position with the blink of an eye. Now that the ETF universe has rapidly expanded and there are a number of complex products offering exposure to the commodity world, contango has become more prevalent than ever. A number of investors have fallen prey to this phenomenon often without realizing what it was and how it impacted their holdings.
http://jlne.ws/Jr5R5N

Hedge Fund People Moves: Man names Ravi Chari as new co-head of FX at AHL
HedgeCo.Net
Hedge Fund News “Hedge fund giant, Man Group has appointed Ravi Chari as co-Head of Foreign Exchange at London-based AHL, its systematic managed futures manager.
http://jlne.ws/Igl4IX

Opalesque Roundtable Series – Brazil 2012
Opalesque
After 2008 and 2010, this is the third Opalesque Roundtable we are publishing about Brazil. Coming back after two years, I was amazed how the markets and the financial industry have marched along and achieved true progress, to the benefit of all Brazilians and investors.
http://jlne.ws/HLulHf
**The roundtable includes: Mauricio Levi, Fama Investimentos , Otávio de Magalhães Coutinho Vieira, Fides Asset Management, Eduardo Moreira, Plural Capital, Mariano Andrade, Polo Capital Management, Marcia Rothschild, Citi and Vassilis Vergotis, Eurex.

Famed Investor Seeds New Fund
WSJ.com
Well-known investor Julian Robertson plans to put tens of millions of dollars into a global macro fund launched by Trient Asset Management, a firm co-founded by a former head of Norway’s sovereign wealth fund, in a bet that the global economic rebound will fall short of investors’ expectations.
http://jlne.ws/HHUQgo

Supply-side drives commodities again
FT.com
Is this the moment when commodity markets throw off the shackles of the macroeconomic outlook? For investors fretting about a Chinese slowdown, excited about the US recovery, or living in fear of a eurozone meltdown that may seem hard to imagine.
http://jlne.ws/HMb91o

United States Commodity Funds LLC Launches the United States Agriculture Index Fund (USAG)
The Business Journals
United States Commodity Funds LLC, a sponsor of exchange traded commodity funds, listed for trading on the New York Stock Exchange Arca, a new exchange traded commodity index fund, United States Agriculture Index Fund, under the ticker “USAG.”
http://jlne.ws/HMJmfw
**DA: Fund to track the SummerHaven Dynamic Ag Index.

Investors wary of volatility after losses
FT.com
Increasing demand by institutional investors for commodities exposure has been a feature of the investment landscape over the past decade. As well as the widely accepted commodities supercycle narrative, investors see the asset class as a way of reducing portfolio risk.
http://jlne.ws/Ir9aeF

Citadel Soars to $115 Billion With Reporting Rule Change
HedgeCo.Net
Citadel, run by Ken Griffin out of Chicago, reported $115.2 billion of regulatory assets in a March 30 filing with the U.S. Securities and Exchange Commission, compared with $12.6 billion of net assets. Millennium, founded by Israel Englander, disclosed comparable figures of $119 billion and $13.5 billion as of year-end.
http://jlne.ws/J5WFac

Tiger Management backs Kjær for new fund
FT.com
Julian Robertson’s Tiger Management is to back a new hedge fund run by Knut Kjær, the former head of Norway’s sovereign wealth fund. Mr Kjær played a significant role in setting up Norges Bank Investment Management, which manages Norway’s pension fund and foreign exchange reserves, and ran the group until 2008.
http://jlne.ws/IOdbOO
**DA: An emerging manager’s dream – to have one’s first investor be someone like Julian Robertson.

Claymore Brings Managed Futures to Canadian Retail Investors
Financial Highway
In February, Claymore Investments announced the launch of the Claymore Managed Futures ETF. The fund is the first liquid, low-cost managed futures fund available to Canadian investors. We spoke to Som Seif, President and CEO of Claymore, about the fund and investing in futures.
http://jlne.ws/HOpNWl

Hymans Robertson dedicates research to managed futures and global macro
Hedge Fund Manager
Hymans Robertson, a leading UK investment consultancy firm, is focusing its attentions on managed futures and global macro strategies in the single manager hedge fund space, as investors increasingly consider a move away from the fund of hedge funds model, HFMWeek has learned.
http://jlne.ws/HZUq82

EDHEC: SWFs and Their Implicit Liabilities
AllAboutAlpha
A new survey by EDHEC-Risk Institute lets managers of the sovereign wealth funds – and those who manage other, related institutions such as central banks or state development funds – speak for themselves about the strategies SWFs pursue. The responsive state-affiliated investment managers, mostly from Middle Eastern and East Asian vehicles, say that they believe SWFs can benefit from a liability-driven investment model, but they worry about models that are too general, inadequately customized to their needs.
http://jlne.ws/HCF0op

Endowments Should Prepare for Risks of Deflation
AllAboutAlpha
Hedge Fund Trends & Alternative Investment Analysis “Mark Schimd, the chief investment officer at the University of Chicago, and Que Nguyen, managing director of strategy there, have written a wide-ranging paper that begins with the challenges at the University of Chicago’s fund and its commitments, but that has broad implications. Their paper is the result of an initiative begun in early 2010, known as Total Enterprise Asset Management (TEAM).
http://jlne.ws/HLa0GS
**DA: Not a certainty, but a scenario that should at least be looked at. From the study: “In a future with low or negative inflation and burdensome levels of debt, a ‘lost decade,’ the real cost of debt will increase, endowment returns may prove significantly below planned levels, and difficult cuts will have to be made.”

Private equity megafunds are a washout for investors
Pensions & Investments
Private equity deals that generated the most excitement before the recession are coming back to haunt their investors’ portfolios. Highflying buyout firms joined together in these “club deal” transactions between 2005 and 2008 to pick off companies up and down the Standard & Poor’s 500 index. The plan was to take advantage of the growing economy and booming stock market to take public companies private, load them up with debt and sell them back to the market in a couple of years for tidy profits.
http://jlne.ws/HOnwqd

Regulation

Commodities funds under fire
InvestmentNews
The CFTC is cracking down on mutual funds that invest heavily in oil, natural gas and other commodities — and it could lead to higher costs for investors.
http://jlne.ws/HMRlsP
**DA: For more info, see the final rule summary on MarketsReformWiki

FSOC issues final rule on nonbanks new research looks at Dodd-Frank one year later
Bailey McCann, Opalesque
The Financial Stability Oversight Council (FSOC), has issued its final rule and guidance on how it will determine which nonbank financial companies pose a threat to the financial system what firms will be designated as “systemically important financial institutions” (SIFIs).
http://jlne.ws/ISwuSf
For more info, see the final rule summary on MarketsReformWiki.

Hedge Funds Pleased With Some Parts of Dodd-Frank, a Study Finds
NYTimes.com
The Dodd-Frank law is not exactly popular among financial services professionals, many of whom consider the new legislation too onerous and restrictive. But, at least according to a recent study, one segment of the industry is pleased with the new reality: hedge funds.
http://jlne.ws/J6pUGi

The Dodd-Frank Bill: Views From The Hedge Fund Industry
HedgeCo.Net
New hedge fund research has emerged from the Frank G. Zarb School of Business at Hofstra University in conjunction with hedge fund accounting and advisory firm EisnerAmper LLP., “The Dodd-Frank Bill – a Year and a Half Later: Views from the Hedge Fund Industry.”
http://jlne.ws/HMG79M
**JK – See the survey HERE.

Switzerland seeks to be on the same regulatory page as other top financial markets
Opalesque
The FT published an article this weekend claiming newly proposed financial regulations coming out of Switzerland would affect hedge fund managers negatively. The proposals were in fact issued in February by FINMA, the Swiss Financial Market Supervisory Authority. They are being looked into by various Swiss government bodies – and would put Switzerland on a similar regulatory page as that of other main financial centres.
http://jlne.ws/IGRNtu

Rosenthal Collins settles CFTC charges
Reuters
The Commodity Futures Trading Commission announced on Thursday a $2.5 million settlement with futures brokerage Rosenthal Collins Group (RCG) over its failure to detect a Ponzi scheme run by one of its customers. The CFTC said the brokerage failed to “diligently supervise” an account used for a multi-million-dollar commodity futures Ponzi scheme from 2006 to 2009.
http://jlne.ws/J6r7xt
**DA: According to the CFTC, “Even if an FCM does not knowingly assist in a Ponzi scheme conducted by an account holder, an FCM cannot ignore questionable transactions that stand out as red flags of fraudulent conduct, particularly when those flags should have been obvious under the FCM’s own policies and procedures.”

SEC Begins Big Dig Into Hedge Fund Data
WSJ.com
The top U.S. securities regulator has started to sift through a trove of new data on the nation’s largest hedge funds and other private money managers to help identify firms whose behavior might pose the greatest risks to their investors. “Pick your fraud of the day and the question is, ‘Can we extract information from this data system together with the other databases we have access to and home in on problems before they do damage?'” said Robert Plaze, deputy director in the division of investment management for the Securities and Exchange Commission.
http://jlne.ws/HKVeez
**DA: Article highlights the types of “revelations” that could be gotten by going through data with a fine-toothed comb. The bad news for the regulatory agencies is their budgets are already stretched thin by other Dodd-Frank requirements.

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