In this issue, the heads of six futures commission merchants deliver a dose of much-needed straight talk on industry issues, Longboard Asset Management’s Cole Wilcox talks managed futures with FINalternatives, and Jim Rogers says the bond rally has run its course, and commodities could be the next big thing.
Quote of the Day: “Conceivably, the world economy is going to collapse sometime in the next decade. And if that happens, needless to say, then central banks are going to print even more money. It’s the wrong thing to do, but commodities will benefit and be a better place to invest than stocks, or certainly better than bonds if that happens.”
– Jim Rogers, in a recent IndexUniverse interview
Observations – Statistics – Commentary
Altegris CTA Challenge: One Week until the Entry Deadline
Time is Running Out to enter Altegris’ inaugural CTA Challenge. The Challenge is open to all qualified CTAs and is seeking entries from both undiscovered talent and established managers. The winner will be announced in early 2014 and will be selected based on both quantitative and qualitative scoring. Firms that have already entered include 2100 Xenon, Abraham, Atlantic, Auspice, Clarke, Dix Hills, Gladius, Haar, IMFC, Metolius, Northfield, Quantum Leap, QIM, Sunrise, Persistent, and several emerging managers. Do you have what it takes?
Todd Fulton of Pioneer Futures on CTA Fees, Capacity Caps and Managed Futures Mutual Funds (Part 2/2)
Todd Fulton, vice president, managed futures at Pioneer Futures, has been around the CTA space for more than 20 years. In Part 2 of our conversation, he spoke with JLN Managed Futures editor Jim Kharouf about emerging managers’ impact on the managed futures space as well as the effect of capacity caps have on various funds. He also discussed how flexible CTAs can be on fees. Fulton says some clients can get ‘zero and 25’ fee structures. And he discussed the potential for managed futures mutual funds, the plusses and questions that still remain for that product.
**Also see: Part 1 – what it is that attracts investors to emerging CTAs, why he isn’t sold on Sharpe ratios and the future for managed futures.
New Restoring Customer Confidence Video
The second video in our Restoring Customer Confidence series deals with customer segregation. Each week we will post a new idea answering the question – how do you restore customer confidence and bring traders back?
|Restoring Customer Confidence||More ideas»|
Customer Segregation: A Clear View
Moving excess customer funds to a clearing house is one way to reduce the amount of capital at risk. Byron Baldwin, SVP, Buyside Relations at Eurex, says his exchange developed segregated account services that can be as wide or granular as needed.
This video is sponsored by:
About the Restoring Customer Confidence video series
In the aftermath of the MF Global collapse, fraud at Peregrine Financial Group and high profile high-frequency trading shocks, John Lothian News asks – how do you restore customer confidence and bring traders back?
The Restoring Customer Confidence video series answers that question by exploring potential solutions using expert interviews and simple animations.
John Lothian News interviewed more than a dozen professionals in the industry to get their ideas and solutions. As these ideas become practice, or as new concepts are adopted by the industry, we will continue to add them to the site.
Visit the video series page on MarketsWiki.tv over the next several weeks for new ideas and solutions.
Emerging Manager Forum – CTA Expo Miami 2012
The Emerging Manager Forum in Miami Beach is set for December 13. This is the first CTA Expo event for South Florida and aims to provide emerging hedge funds and CTAs from the US, Europe and Latin America with capital sources.
The event will feature a strong lineup of speakers and CTAs, looking to provide information about their funds. Among the speakers are Michael Livian of Livian & Co., who will talk about what family offices are looking for, Blu Putnam, chief economist of CME Group on game changers and Alexandre D’Avila of Pires D’Avila who will talk about marketing in South and Latin America, as well as Mark Shore of Shore Capital Management who will talk about decoding myths of managed futures. Those are just a few speakers.
Managed Futures editor Jim Kharouf will also be on a panel with two other media professionals to talk about the media, how to use it to build your business. This is an interesting panel for a couple reasons. For one, many in the CTA and hedge fund space are often looking for ways to use media in many different ways but often don’t know how. Secondly, media means many different things today. Given the rise of the internet, the decline of traditional newspapers and magazines, there is more than one way to use the media to your advantage. We’ll talk about that and more at the show. Hope to see you there.
Click here for a link to CTA Expo video with Frank Pusateri and Bucky Isaacson.
|Managed Futures Scorecard||11/29/2012|
|Newedge Indices||MTD Return||YTD Return|
|Newedge CTA Index||-0.16%||-3.08%|
|Newedge CTA Trend Sub-Index||0.19%||-4.70%|
|Newedge Trend Indicator||0.36%||-16.11%|
|Newedge Short-Term Traders Index||-0.46%||-5.58%|
|Barclay Indices||MTD Return||YTD Return|
|Barclay CTA Index||-1.03%|
|Barclay UCITS Index||6.76%|
|BTOP FX Index||1.51%||1.93%|
|BTOP 50 Index||0.45%||-2.25%|
|Morningstar Long/Short Com. Index||-0.19%||-10.28%|
Top 50 Brokers of 2012: The good, bad and ugly of a post-MF Global world
It has been a challenging year for futures commission merchants (FCMs). One dominated not by the usual issues of technology builds, disintermediation, transitioning to cleared over-the-counter (OTC) trading and the continuous challenges of a competitive landscape, but by a customer base weary of the very structures they have depended on and assumed were rock solid. End-user confidence in the industry took a double-barreled hit over the last year with the Peregrine Financial Group (PFG) failure occurring eight months after the MF Global debacle. Futures invited six industry leaders representing the entire spectrum of the FCM community to talk about the state of the industry. Here is what they had to say.
**DA: Refreshingly straight talk from industry leaders. We need much more of this, like, soon.
Q&A: Family Office Opens Up Historic Managed Futures Strategy
Managed futures specialist Longboard Asset Management started life as Blackstar Funds, a family office overseeing the assets of the “grandfather of managed futures,” Tom Basso. The firm recently decided to take on outside money, which it is hoping to attract through its newly-launched Longboard Futures Strategy Fund, a mutual fund offering retail investors access to a hedge fund-like, rules-based strategy. Longboard CEO and chief investment officer Cole Wilcox spoke to FINalternatives Senior Reporter Mary Campbell recently about the name change, the new fund and the future of managed futures.
Jim Rogers: Short US Bonds, Likes Russia
Jim Rogers takes no prisoners in the way he makes the case for commodities. The author of “Hot Commodities” is so bullish—particularly on agriculture these days—that hearing what he has to say can leave you a bit unsettled. When IndexUniverse.com Managing Editor Olly Ludwig caught up with Rogers recently, he said new RBS’ lineup of commodity ETNs that have his name on them are so far superior to the competition.
**DA: Generally, when a trader talks his position, I tune out. When the trader is Jimmy Rogers, though, I pay attention.
Quant fund launches at record high
Trend-following quantitative “black-box” hedge funds are accounting for their highest-ever proportion of hedge fund start-ups, despite weak returns since the financial crisis. A record 187 quant, or algorithmic funds, launched last year and account for 12 per cent of all hedge fund start-ups, another record, according to Preqin, a data provider whose figures go back to 2000.
NFA and CME Group Select AlphaMetrix to Provide Data Aggregation Services
BusinessWire, via Financial Post
As futures industry self-regulatory organizations, the initiative will allow CME and NFA to build a system to collect balances for all bank depositories holding customer segregated, secured amount and sequestered funds on behalf of futures commission merchants (“FCM”) on a daily basis. NFA and CME will perform an automated daily comparison of the balances reported by the bank depositories to the balances reported by the FCMs to identify any discrepancies.
**DA: Daily confirmation will be featured as one of the segments of our MarketsWiki.tv Restoring Customer Confidence series. And look for an AlphaMetrix segment for the series soon.
Managed Futures/Managed Funds
The benefits of using a commodity trading advisor fund
What are the benefits of using a CTA (managed futures) fund in a portfolio? What is a reasonable allocation, and where should that allocation come from? Answers provided by Zenith, van Eyk, Lonsec, Mercer and Morningstar.
Deutsche adds Swedish managed futures fund to dbSelect platform
Deutsche Bank has added a second fund from Swedish managed futures firm Coeli AB to its dbSelect platform, a method allocators can access liquid hedge fund strategies.
EEA launches managed futures fund
EEA Fund Management has launched a Dublin-domiciled managed futures Ucits fund which aims for an annualised return of 15-20 per cent over three to five years. Managed by head of trading Darran Goodwin, the EEA Diversified Trends fund includes long and short positions in equities indices, bonds, currencies and commodities and futures contracts.
BlackRock Merges Gas Fund with Commodity Index
Blackrock is merging its Natural Gas Commodity Index Fund (GAS) with its Broad Commodity Index Fund (CBR). It’s also changing the investment objective of CBR to track the Morningstar Global Long/Flat Commodity Index. Unitholders have approved the merger and change in investment objective, which was announced Nov. 23rd.
**DA: This is simply a nice way of saying that the 5-year bear market in Nat Gas killed the fund.
Pensions & Institutions
Institutional Investors Crowd Into Active CTA Market
In the last five years institutional investors have roughly doubled their allocation to Commodity Trading Advisor (CTA) funds, which commonly advise investors on the use of future contracts, according to an in-depth analysis by research firm Preqin. There are now 713 global institutional investors with an active CTA portfolio, a significant increase on 2011, when the number stood at 504, and 2008, when just 331 had CTA funds in their holdings, according to the research firm.
Bond party is over, says Caisse chief Sabia
The Globe and Mail
The bond party is over – this according to one of Canada’s biggest pension fund managers, which plans to cut back significantly on its fixed income holdings. “Over the last three to four years returns on fixed income have been amazing – almost equity-like,” Michael Sabia, chief executive of the Caisse de dépôt et placement du Québec, told the Financial Times.
**DA: Says money will be redeployed to “less liquid assets such as private equity, real estate and infrastructure.” So interests rates are set to rise, but real estate and infrastructure investments will fare well?
Louisiana Pensions Among Most Underfunded
The Pelican Post
A study of the 100 largest public pension plans in the U.S. highlights Louisiana’s pension fund troubles. The 2012 Public Pension Funding Study was conducted by Milliman Inc., an independent actuarial and consulting firm. The public pension plans were measured based on accrued liability, or the total amount each fund has promised to pay beneficiaries in the future. Two Louisiana pensions are included in the study, the Louisiana State Employees Retirement System (LASERS) and the Teachers’ Retirement System of Louisiana (TRSL).
**DA: Louisiana joins California, Ohio and my home state of Illinois as states holding pension plans together with duct tape and baling wire.
Extension to CFTC registration deadline highly likely for funds of funds
Funds of funds are likely to be given an extension to CFTC registration amid concerns that many organisations are still struggling to identify whether they can claim the Regulation 4.13(a)(3) exemption. Regulators have been criticised for not communicating properly with market participants about the rules, which are due to be implemented from December 31, 2012.
AIFMD Leaves Managed Accounts Unscathed
The most recent FSA conference paper on the Alternative Investment Fund Managers Directive (AIFMD) makes a small contribution to demystify new reporting standards. The gradual roll out of regulatory demands has sparked the search for loopholes and desirability of Managed Accounts (MAs).
CFTC Enforcement Blitz: Eagle, Intrade, Cantor, Harbor Light
The U.S. Commodity Futures Trading Commission (CFTC) seems to be increasing the rate of its enforcement of financial regulation. The agency issued four new enforcement actions in the last week, against Eagle Market Makers, Cantor Fitzgerald, Harbor Light, and most recently, Intrade.
Crunch time for alternative fund administrators
The recent departures of Andrew Gordon from BNY Mellon and Stewart Bent from Credit Suisse underline an industry trend of cost-cutting and consolidation. Asia’s alternative fund services industry is in a state of flux, with newcomers catering to small, indigenous funds while consolidation and cost-cutting is taking place at larger providers.
**DA: Fund admin is often a loss leader, with firms using it as a foot in the door to offer higher margin services like securities lending, cash management, and even brokerage and execution.
The Hedge Fund World Is Furious With The Head Of The SEC Right Now
Documents reviewed by the Wall Street Journal indicated that SEC Chair Mary Schapiro purposely delayed the approval of the abolition of the solicitation ban because she was concerned about her legacy.
**DA: I was wondering what happened to the hedge fund marketing changes mandated by the JOBS Act. Now I see – it was pre-empted by the need to dress up a failed legacy. Putting style over substance is just what we need in a regulator.
Chinese Super-Investor CIC Rings Alarm Over Western Regulatory Policy
Jun Liqun, chairman of the supervisory board at China Investment Corporation (CIC), reprimanded western hypocrisy, targeting regulatory policies. The financially empowered £410 billion sovereign wealth fund expressed particular concern over the impact of regulations on global recovery. Liqun’s message, however self-interested, resonated powerfully with investors.