Observations / Statistics / Commentary
Emerging Manager Forum Miami, December 3, 2013
Emerging Manager Forum Miami will be CTAExpo LLC’s 15th conference. Over the past 6 years CTAExpo has grown from hosting one conference a year to four, with attendance growing from 140 in Chicago in 2008 to 450 in 2013. Over 1000 of 2013’s total attendees, will only attend one CTAExpo Conference. In 2012, almost 40% of our attendees had never attended a CTAExpo conference before.
CTAExpo offers more than a conference. We are expanding our internet and social media presence every year. Our website now has almost 2000 hits a month, an average of 1140 unique visitors. Our on-line Service Provider Directory is viewed an average of 150 times each month. Our LinkedIn Group has 1306 members and we have an active expanding presence on twitter. We provide exposure for Industry Professionals at more than just our conferences.
We now have 165 registered for Emerging Manager Forum Miami, December 3, 2013. This includes over 70 registered as capital sources and 21 Traders. In the past 2 weeks we have added over 45 people to the registration list. Currently, registrations are running over 30% ahead of last year’s conference in Miami. Emerging Manager Forum Miami 2012 had 265 registered including over 120 registered as capital sources and 42 Traders. Capital sources, including asset allocators, pool operators and professional clients attend CTAExpo events free. Register below.
***DA: Note from Frank & Bucky – registrations are running 30 percent ahead of last year’s inaugural Miami conference. Great to see the added location is picking up steam.
Quote of the Day
This isn’t a case of the managed futures industry being flawed. It isn’t even about managed futures. It’s about Wall Street ripping people off through their packaging of product. It is about layering fees on top of fees to create access to an asset class.
Attain Capital – in it rebuttal to the Bloomberg story on managed futures. “No, Bloomberg, the managed futures industry is not a scam.”
Residual Interest Rule Cometh
Doug Ashburn and Jim Kharouf, John Lothian News
The Commodity Futures Trading Commission took up the issue of enhanced customer protections, finalizing a rule that would require futures commission merchants (FCMs) to adopt new risk management programs that relate to operations, capital and customers fund segregation.
***DA: After reading the commentary, click over to MarketsReformWiki for a full summary and links to more good stuff.
2013 Set To Be The Worst Performing Year For CTA
The CTA benchmark is in negative territory for the fifth month in a row and 2013 is set to be the worst performing year for CTAs, according to recent Preqin report.
Preqin’s report, however, points out that the outlook is not entirely gloomy as there is still investor appetite for CTAs.
Preqin’s report notes the number of new entrants to the CTA industry has been declining slowly since 2011. The industry recorded 204 launches in 2011, while so far in 2013, Preqin’s hedge fund analysts could track only 104 CTA launches. The report points out if the trend continues, 2013 could well witness the lowest number of launches post-crisis.
CTA Performance in the Red for a Fifth Consecutive Month
Preqin Press Release
CTAs posted average net returns of -0.67% in September, compared to 1.74% for all single-manager hedge funds
Preqin’s Hedge Fund Analyst* database reveals that CTAs posted negative returns for the fifth month in a row in September, bringing the strategy’s year-to-date performance to -2.45%. Over the last 12 months,CTAs have produced average net returns of -3.77%.
A Dating Service for Those Who Love Hedge Funds
By Kirsten Salyer – Bloomberg
There’s a new dating website in town. This one doesn’t care if you like brunettes, how often you shower, or if you would ever have sex on a first date. Instead, it wants to know what you like in a portfolio. And as with any online matchmaker, when you fill out your anonymous online profile, trudge through the survey questions, and arrive at your algorithmically determined matches, you’re still facing quite a bit of risk.
**Press release from Hedgez here – http://jlne.ws/1aP2KG6
Barclay CTA Index Slides 0.54% in September
FAIRFIELD, Iowa — Managed futures lost 0.54% in September according to the Barclay CTA Index compiled by BarclayHedge. The Index is down 3.13% after three quarters in 2013.
First Trust Launches Actively Managed Commodity ETF – ETF News And Commentary
First Trust is probably best known for its lineup of AlphaDEX funds which seek to pick better stocks in a variety of countries or sectors. First Trust has also begun to branch out into various other, more active strategies as of late, pushing out products in the senior loan market ( FTSL ) , and the managed futures space with their FMF fund. The trend isn’t stopping there though, as the company has just released its latest active fund, the Global Tactical Commodity Strategy Fund (FTGC) .
**JK – First Trust gets into the 40 Act space.
No, Bloomberg, the managed futures industry is not a scam
Is the managed futures industry a scam? Bloomberg would surely have you think so with its sensationalized headline “How Investors Lose 89 Percent of Gains from Futures Funds”. And I guess we should expect an article like this with stocks at all time highs, attacking an asset class that performs as a diversifier and has not gone up in tandem with stocks.
Why to be wary of managed futures funds
Larry Swedroe – MoneyWatch
A recent Bloomberg news article on a managed futures fund managed by Morgan Stanley caught the attention of my colleague Kevin Grogan. The article describes how several managed futures funds offered through a limited partnership structure charged fees that were so high that they wiped out any gain for the investor. http://jlne.ws/1816dgs
**JK – Bloomberg splash keeps rippling.
AlphaMetrix to Liquidate Fund Pools, Return Money to Investors
Matthew Leising – Bloomberg
AlphaMetrix Group LLC, which directs investor money to accounts run by money managers, will begin an “orderly liquidation” of its sponsored funds tomorrow, the firm said in an e-mailed statement.
**JK – There will some redemptions, but I doubt there will be redemption.
Redemption requests push AlphaMetrix to liquidation
Fund manager AlphaMetrix, which earlier disclosed financial troubles, said on Wednesday it will end trading in its commodity pool on Thursday because of a flood of redemption requests. “AlphaMetrix has decided that it is in the best interest of all investors for the funds to cease trading as of Oct. 31, 2013, and enter into an orderly liquidation,” the firm said in a statement.
AlphaMetrix owes $600,000 in fee rebates
By Christine Williamson – Pensions & Investments
Stephen J. Serio Alek Kins brought in an accounting firm to boost financial controls.
Executives at managed futures managers, commodity trading advisers and hedge funds are furious and stymied over non-payment of fee rebates owed to them by AlphaMetrix Group LLC.
AlphaMetrix ordered to repay managers on its managed account platform
By Christine Williamson – Pensions & Investments
The National Futures Association ordered AlphaMetrix Group to pay $600,000 of management and incentive fees owed to some of the 90 managed futures funds, commodity trading advisers and hedge funds on its managed account platform by Nov. 1.
AlphaMetrix records reviewed by firm whose founder owned stake
The founder of an accounting firm that reviewed internal controls at fund manager [[AlphaMetrix]] owned a small slice of the company until recently, when he sold it to avoid a perceived conflict of interest, a spokeswoman for the accountant said on Tuesday.
***DA: The Arthur Bell brand is synonymous with managed futures accounting – the people you want in there to sort out this mess and get the money returned to investors and managers. Art sold his stake to avoid any conflict of interest. There is no story here, in my opinion. To read the full press release, click here: http://jlne.ws/17wP2ag
Managed Futures / Managed Funds
Altegris CTA Challenge 2013 Participants Head Into Final Stretch
By Altegris Clearing Solutions
Altegris Clearing Solutions (www.managedfutures.com) is inviting the investment community to follow the final months of the Altegris CTA Challenge 2013, a competition for professional managed futures managers to recognize and showcase top performing managed futures trading programs. Altegris Clearing Solutions, part of the Altegris Group of Companies, is a premier gateway to managed accounts for investors in managed futures.
Let’s hear it for the little guys
By Jonathan Eley – FT
When it comes to funds, size matters – but not always in a good way.
The industry is heavily concentrated. The biggest funds attract the most money. The top five providers in the UK raked in £20bn of assets in the first half of the year, while across Europe the top five accounted for half of the market by sales. That’s because the whole industry, as stated in these pages, is geared up to harvest assets. The more assets you have under management, the bigger your fee income.
Foreign Hedge Funds Warm to China
Chao Deng – Wall Street Journal
More foreign hedge funds are devoting resources to China, attracted by strong returns, the potential for growth and signs that the country will continue to develop its financial markets.
A Recent Flourish for Winton Capital
ANITA RAGHAVAN – NY Times
Winton Capital Management is showing some improvement in the art of investing.
Winton Capital, the money manager well known for its quirky and outspoken founder, a Cambridge University theoretical physicist, recovered from its worst performance since 2008 and posted a gain last month. http://jlne.ws/1cqT4UJ
Managing the Futures
BY Matt Zeman -TheStreet
Given current market conditions, investors would be well served looking for further diversification opportunities. One such opportunity is with managed futures.
Commodities are going back to fundamentals, says Harcourt’s Jeremy Baker
Viola Caon – Investment Europe
Jeremy Baker, executive director of commodity investments at Harcourt, sees change taking place as commodities are once again priced on fundamentals.
Investments in Commodity Hedge Funds Fall Sharply
By Christian Berthelsen – WSJ
Two of the Industry’s Largest Players Close Shop
Investor money in commodity-focused hedge funds dropped sharply during the third quarter, according to data released Friday by a research group, following the closure of two of the industry’s largest commodity hedge fund firms.
Investor money in commodity-focused hedge funds dropped sharply during the third quarter, according to data released Friday by a research group, following the September closure of two of the industry’s largest commodity hedge fund firms. Assets under management in commodity hedge funds fell $1.6 billion, or 5.6%, to $26.5 billion, from the prior quarter, according to Chicago-based Hedge Fund Research Inc.
**JK – Also from this piece: London-based Clive Capital and Darien, Conn.-based Arbalet Capital both informed investors in September they would close.
Pensions & Institutions
Investors tell commodity fund managers to get more active
Pension funds and private wealth managers are growing increasingly frustrated with poor performance from commodity funds and have called on managers to get more active as they seek to boost returns. Institutional investors need to justify why they still hold commodity funds after years of disappointing returns and while they currently do not need a hedge against inflation – one of the major reasons to be in the asset class.
Abandon all hope, ye who venture here
Dan McCrum | FT Alphaville
In our descent though the rings of the alternative investment universe, we have found that hedge funds are zombies and David Swensen is a mythic superman. So what then to make of venture capital? The Wizard of Oz revealed, perhaps.
Home bias hurts institutional investors
Even though institutional investors try to maximize returns, politics and localism still play big roles in their investment choices. Two separate studies found similar patterns of parochialism at two different levels: sovereign wealth funds and public pension funds in the United States.
Public Pension Returns Up; Allocate More To Risky Investments: Study
It is clear from the above study that public funds have benefited in recent years due the excellent performance of the stock markets. It is also clear that enthused fund administrators, looking to close the funding ratio gaps, are going a step further into riskier avenues such as alternative assets.
UK pension funds ‘turn gold into lead’
UK pension funds are “wasting” more than £6bn a year by investing in actively managed equity, bond and property funds rather than cheap and better performing passive funds, according to new research. Analysis by Evercore Pan-Asset, an investment manager, of the 14 asset classes and sectors most favoured by UK pension funds, found the median passive fund outperformed the median actively managed fund in 13 of them over the past five years. Only managers of commodity funds earned their corn.
***DA: Word to the wise – beat your benchmark, net of fees, or find a new line of work.
Virtus and Cliffwater partner to offer liquid alternative investments
The new venture will leverage Cliffwater’s expertise in portfolio construction and its research of more than 4,000 alternatives managers. Its open-architecture approach to selecting managers is used by some of the largest institutions, pension funds and endowments. Cliffwater has approximately USD70bn of assets under advisement, including approximately USD52bn in alternative strategies.
CFTC Delays Cases, Shelves Probes, in Funding Squeeze
Jean Eaglesham – WSJ.com
The Commodity Futures Trading Commission is so cash-starved that the agency is being forced to delay cases, shelve certain probes and decided not to file charges against two former traders over J.P. Morgan Chase & Co.’s “London whale” trading mess, a top official said.
***DA: Let’s hope it does not become the Wild West, with the industry’s bad actors becoming even more brazen. Too many black eyes as it is.
Ex-Madoff trader implicates other workers in decades-long fraud
A former trader at Bernard Madoff’s investment firm described on Thursday how he helped create false trades with two other former employees to prop up Madoff’s $17 billion Ponzi scheme.
***DA: You know, like this one that slipped through the cracks.
CFTC drops legal appeal, paving way for new position limit rule draft
The Commodity Futures Trading Commission voted to drop a legal appeal of a court ruling to strike down the Commission’s 2011 position limit rule, paving the way for a new draft of a rule.
A US court had said in 2012, when it struck down the CFTC rule, that the regulator required a finding of necessity before establishing position limits. The CFTC appealed this.