Observations – Statistics – Commentary

In today’s issue, a Forbes commentary sees a rough patch ahead in the equities and recommends managed futures as a safe haven. India’s NSEL is in the midst of its own MFG/PFG meltdown. A Risk.net article spotlights our friends at Campbell & Company. And, though commodity funds have been hit pretty hard recently, that is not stopping the trend of new fund launches. We lead off with Jim Kharouf’s interview with industry veteran Rich Bornhoft, who discusses what he looks for in a manager.

Richard Bornhoft

Richard Bornhoft, founder of the Bornhoft Group, discusses what he looks for in CTAs
MarketsWiki.tv

Richard Bornhoft is founder, president and CIO at Bornhoft Group and has specialized in the creation and oversight of CTA-managed futures portfolios for more than 30 years. He sat down with JLN editor-in-chief Jim Kharouf to talk about the managed futures space, the opportunities in the space and the challenges that are still facing the industry.

Watch the video »

CTA Expo Chicago, September 19, UBS Tower Conference Center
CTA Expo
We invite you to register for the CTA EXPO in Chicago on September 19th, 2013 at the UBS Tower Conference Center located at One North Wacker Drive. Commodity Trading Advisors, Service Providers, Press and Capital Sources should register now because all previous events have been sold out and we anticipate a repeat here in Chicago.
http://jlne.ws/14g6Q3S
**DA: I had coffee with Bucky yesterday and he said the conference is about 75 percent sold, and at the rate registrations are coming in, it will be sold out by the end of the month. He says about half the registrants have been capital sources, about 25 percent have been traders, and the rest service providers and media.

Overlaying Strategies in Managed Futures: Does it Help and Investor?
By Mark Shore, Shore Capital Management
I was recently interviewed for a few articles and the topic of overlaying strategies was discussed as a potential component of a managed futures portfolio. Realizing this topic is not discussed as much as it should be; it opens the door to a more in-depth understanding of managed futures. It is a topic I cover in my managed futures course at DePaul University.
http://jlne.ws/16ejOTa

Managed Futures to find a Hero in 10yr Notes?
Attain Capital Management
Managed Futures could sure use a good outlier move from somewhere. They are roughly even YTD according the Newedge CTA index, and just about everyone is holding out for a hero til the end of night (in this case the year). In more scientific language, managed futures has been waiting for a catalyst to jump start performance. So who is this knight in shining armor? It just might be the bond market, spurred on by 10 Year Treasuries.
http://jlne.ws/19qG1C9
**DA: We need a hero right now.

Clarity Tear Sheet Creator Provides Hedge Fund, CTA, and Alternative Investment Managers with Tear Sheet Design Solution
The Clarity Tear Sheet System is a new online service providing hedge fund managers, Commodity Trading Advisors, and alternative investment managers with professionally designed tear sheets and an online interface for accessing and easily updating performance information. Gate 39 Media, developer of the Clarity Portfolio Viewer for providing investors with portfolio performance reporting, announces the launch of the Clarity Tear Sheet Creator.
http://jlne.ws/18ur25r

CME Group/OptionsCity Software Webinar, Aug 21, 3pm EDT
Energy markets bring together a large and diverse community of market participants of buyers and sellers trying to protect themselves from price and volatility risk. This webinar will highlight current energy opportunities and will also demonstrate how to leverage OptionsCity Metro to successfully trade energy products on CME Globex. Hosted by Jeff White, director of energy options at CME Group and OptionsCity’s Brian Baumann.
http://jlne.ws/14K4bG3

Lead Stories

Where To Invest When The Stock Market Bubble Bursts 
Jeffrey Sica – Forbes.com
NFL Hall of Fame Couch, Bill Parcells, once said, “There are two things in New York, euphoria and disaster.” While Parcells was reflecting on his experiences as a football coach in New York, his words can be applied to the stock market. Since 2000, investors have become all too familiar with these same two things; euphoria and disaster.
http://jlne.ws/127pFsu
**DA: Notice he says “when” not “if.”

National Spot Exchange Announces Contract Settlement Plan
WSJ.com
India’s National Spot Exchange, which shut its operations last week following regulatory probes over possible trading violations, said Wednesday that it would settle all its outstanding contracts in about seven months. The exchange, owned by Financial Technologies (India) Ltd., has to facilitate payments of 55.74 billion rupees ($908 million) owed by buyers to sellers.
http://jlne.ws/19vjnsr
**DA: If you have not been following this story, head over to the John Lothian Newsletter blog. It’s a ruddy mess!

Campbell opens non-trend programs to investors
Kris Devasabai – Risk.net
One of the oldest commodity trading advisers (CTAs) in the US is posting industry-leading returns with a suite of new strategies. Campbell & Company’s Prism portfolio, which was opened to outside investors on April 1, is up around 20% year-to-date, Hedge Funds Review has learned.
http://jlne.ws/1cF7AZG
**JL: One of the great names of the CTA world.
**DA: If you missed our recent interviews with Campbell, visit the Managed Futures channel on MarketsWiki.tv

Commodity funds on track for big launch year in uncertain market
Reuters An ex-Glencore oil trader and a veteran grains merchant are among those behind the largest number of commodity fund launches in 3 years despite investor worries the multi-year rally in those markets is over.
http://jlne.ws/14OwRef

Now That Hedge Funds Can Advertise, What Are Commodity Pools – Chopped Liver?
National Law Review
Chicago partner David Matteson and associate Andrew Raby published an article in Futures titled, “Now That Hedge Funds Can Advertise, What Are Commodity Pools – Chopped Liver?” The article discusses the new advertising rule and whether commodity pool operators can take advantage of the changes.
http://jlne.ws/17s6NUT
**DA: As soon as an exchange lists a chopped liver futures contract, I will open a commodity pool that trades it.

John Henry buying the Newspaper Drawdown?
Attain Capital Management
John Henry must not be hurting too bad from his eponymous managed futures program’s closing down in 2012, as the futures industry hall of famer recently made headlines for buying the Boston Globe from the New York Times for $70 Million (on the heels of Amazon’s Bezos buying the Washington Post – what’s with billionaires buying newspapers). Henry also got married somewhere between all that.
http://jlne.ws/17PMfF0
**DA: Attain reminding us that not even Mr. Henry should try to catch a falling sword. 

Managed Futures/Managed Funds

Hedge Funds Add 1.2% In July
FINalternatives
Hedge funds rose 1.2% last month, leaving them up less than one-quater as much as the Standard & Poor’s 500 Index for the year. eVestment’s Hedge Fund Aggregate is up 4.49% through July. The S&P500, by contrast, is up 19.62% on the year after a 5% surge last month.
http://jlne.ws/13n9dHu
**DA: Managed futures down .87 percent for the month; down 2.29 percent year to date.

Moving Into the 40 Act Space: An Offer of Assistance
AllAboutAlpha
In a new white paper, Citi Prime Finance offers an “introduction and overview of 40 Act Liquid Alternative Funds.” The term “40 Act” refers of course to the Investment Company Act of 1940, the key legal context for the mutual fund industry in the United States. The same act also contains an exemption critical to the legal context for the hedge fund and PE fund industries.
http://jlne.ws/13ngc31

Can Managed Futures Regain Their Mojo?
Financial Advisor
The financial market crash of 2008 brings back good memories for some investors––like, those who shorted the market and those who invested heavily in managed futures. In a year when just about every investment category on the planet went splat, managed futures as a collective group stood tall with a gain of more than 15% (as measured by the Altegris 40 index).
http://jlne.ws/13ni5g9

Among the Key takeaways for the month of July 2013
ValueWalk
The Eurekahedge CTA/Managed Futures Index was the only strategy which saw negative returns of 0.61% in July and 2.12% year-to-date as systematic traders with a global mandate suffered losses. North American CTA/managed futures managers fared relatively better with discretionary strategies witnessing gains of 1.16% in the month.
http://jlne.ws/16NjeKW
**DA: Plenty of data in this mixed-bag article.

Gold Bull Paulson Cuts SPDR Stake by Half in Bear Market
Bloomberg
Billionaire hedge fund manager John Paulson, who told investors as recently as last month that they should own gold, cut his holdings in the metal by more than half as prices plunged into a bear market.
http://jlne.ws/127os4r

**DA: Wait. It’s “buy high; sell low,” right? Or is it the other way?

Does The New First Trust Managed Futures ETF Belong In Your Portfolio?
ETF Daily News
he wave of ETF launches continues, with First Trust seeking to get in on the game as well. The company has just announced a novel product targeting the managed futures market, seeking to give investors a new option for investing seeking uncorrelated returns in today’s somewhat uncertain investing climate.
http://jlne.ws/1eMfyMv

Dalio Patched All Weather’s Rate Risk as U.S. Bonds Fell
Bloomberg
As the bond market plunged in late June, Ray Dalio convened the clients of Bridgewater Associates LP, the world’s largest hedge-fund manager, to tell them that a fund designed to withstand a broad range of market scenarios was too vulnerable to changes in interest rates. Bridgewater, citing months of study, said it had underestimated the interest-rate sensitivity of various assets in its All Weather fund and was taking steps to mitigate the risk
http://jlne.ws/14BFYuH
**DA: Seeking any port in a storm.

Pensions & Institutions

Raymond James offers alts to RIAs
InvestmentNews
In an effort to provide a broader array of alternative investments to its advisers, RIAs affiliated with Raymond James Financial Inc.’s investment adviser division will be able to access the firm’s alternative investment platform beginning in September. The Raymond James Alternative Investment Group offers research and support for private equity, private real estate, hedge funds, managed futures and alternative mutual funds, the company said.
http://jlne.ws/16orFjw

Illinois Teachers issues call for investment consultant
Pensions&Investments
Illinois Teachers’ Retirement System, Springfield, has posted an RFP on its website for an investment consultant for the $37 billion pension fund. State law requires rebidding of contracts every five years. The new contract begins Jan. 1, 2013, said David Urbanek, a TRS spokesman, in an e-mail.
http://jlne.ws/1cFHHJf

Korea State Fund to Spend Up to $10 Billion on Alternatives
Bloomberg
Korea Investment Corp., the nation’s sovereign wealth fund, plans to spend as much as $10 billion to triple its allocation to alternative assets, diversifying its portfolio to smooth the fund’s returns. The sovereign wealth fund, known as KIC, wants to increase holdings of private equity, real estate and hedge funds to as much as 20 percent of its portfolio by 2016 from 6.1 percent at the end of 2012, its chief investment officer said.
http://jlne.ws/15iTOlE

Regulation

CFTC Harmonizes CPO Compliance Requirements With SEC
Joe Mont – Compliance Week
The Commodity Futures Trading Commission on Tuesday issued a final rule that allows commodity pool operators dually registered with both it and the Securities and Exchange Commission to rely on the latter’s disclosure, reporting, and recordkeeping compliance requirements.
http://jlne.ws/148qXRJ

Statement Of CFTC Commissioner Scott D. O’Malia
Today, after obtaining permission from the Commission’s Office of the General Counsel, I am releasing my dissent in a redacted form to the request by the Division of Enforcement (DOE) to issue an omnibus order of investigation that, through an “absent objection” process, could potentially be extended continuously without the opportunity for a Commission vote. I believe three steps must be taken to ensure that the Commission is executing its enforcement authority in a transparent and legally sound manner.
http://jlne.ws/18ur51c

SEC Charges Two Former JPMorgan Traders Of Fraudulent Practices
Nasdaq
The U.S. Securities and Exchange Commission has in Wednesday charged two ex-traders of financial services giant JP Morgan Chase  for fraudulently overvaluing investments to conceal massive losses in a portfolio managed by them. Separately, the two traders were also slapped with criminal charges by the U.S. Attorney’s Office for the Southern District of New York.
http://jlne.ws/16NjFoI
**DA: If U.S. regulators are really moving away from the “agree to a fine without admitting or denying guilt” strategy, we might actually see industry change.

ESMA Answers All Your Questions
George Bollenbacher -TabbFORUM
In the unfolding implementation of derivatives reform in Europe (which is occurring at the same time as it is in the US, Canada, Asia and pretty much everywhere else), the European Securities and Markets Authority (ESMA) has adopted the welcome approach of issuing a “living Q&A” document where the regulator responds to industry questions over time.
http://jlne.ws/1cF7CRh
**JL: A living Q&A, from the regulators with all the answers.

Regulators to test commodities bankers’ mettle
Colin McLean – Financial News
The growing involvement of banks in commodities markets is finally being placed under the microscope. Next month the US Federal Reserve is expected to report on whether it will allow US banks to continue with their current involvement in the commodity markets. Its action could well prompt governments around the world to follow the lead.
http://jlne.ws/18ur4uf

In case you missed it:

Joe O'Neill

When Joe O’Neill Went Hollywood: “Trading Places” 30 Years Later
MarketsWiki.tv

Joe O’Neill has been around the futures markets since 1970. If you stick around long enough, you will have seen just about everything. Such was the case in 1983 when he was proposed with the idea of filming a movie, “Trading Places” at the New York Board of Trade. Now celebrating its 30th Anniversary, “Trading Places” is still considered the go-to movie when anyone in the industry talks about the futures markets, even if the floors ain’t what they used to be. O’Neill spoke with JLN editor-at-large Doug Ashburn about the making of “Trading Places,” how true the film is to real life and also shared some behind-the-scenes stories about the movie.

Watch the video »

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