Observations / Statistics / Commentary

Emerging Manager Forum Miami, December 3
We have over 35 managers registered for the Forum in Miami Beach, at the Fontainebleau, on Dec. 3 many of which are new names. We still have a few slots open for professional capital sources and investors who can attend for free. If you are interested in attending please click the link below.
http://jlne.ws/Hjvnzc
***DA: John Lothian News editor-in-chief Jim Kharouf will be hosting a breakout session where he will demo our CTA Profiles, a video marketing solution for CTAs. Be sure to attend.

Altegris Clearing Solutions Announces CTA Challenge 2014
The first year of the CTA Challenge is just about over, which means it is time to enroll for next year. Click the link below to get your fund enrolled. 
http://jlne.ws/1cNj49B
***DA: Your Altegris contact, Max Eagye, will be in Miami at the Emerging Manager Forum. You can find him in the exhibit hall. Or in the bar. Or golfing at Turnberry.

Quote of the Day:

“Most investors are not going to create alpha. It’s a zero sum.”

– Ray Dalio, founder of Bridgewater Associates, in the Reuters story “Why Hedge Funds Still Managed to Seduce.”

What’s in a name? CME’s Kim Taylor Says Extra Cost
JohnLothianNews.com
Clearinghouses are now considered systemically important to financial markets. But with that designation are new regulations and capital requirements. John Lothian News sat down with Kim Taylor of CME Clearing to talk about how a new requirement will raise costs for market participants. Commodity Futures Trading Commission (CFTC) regulation 39-33, passed on November 15,  is a capital requirement that is set to be implemented by the end of the year. It calls for US-based clearinghouses to be designated as qualified central counterparties (QCCPs), which ultimately would give them more favorable capital requirements under Basel III but tough capital US guidelines.
http://jlne.ws/1fnl90B

Lead Stories

Question: Can CTA’s with $1 Billion AUM Trade Grains?
Attain Capital Management 
One of the many exhilarating experiences about our daily blog writing is the ability to receive feedback from our dedicated readers, which in turn prompts more discussions and questions about the managed futures industry. The latest question asked is, “Do CTA’s with AUM’s over $1 Billion have the ability to trade grain markets?” The simple answer is yes, but the long answer; most of them don’t. First, on an elementary level, you won’t find anything on the CME website detailing a restriction on managers exceeding an arbitrary assets under management, from entering into a position into any market, nevertheless any of the grain markets. That’s not to say the question is entirely off; the root of the question, and in our opinion, the far more intriguing factor is not that they can’t but that they mostly don’t. 
http://jlne.ws/1balTlw

Analysis: Why hedge funds still manage to seduce
Reuters
Hedge fund investor Hugh Culverhouse Jr. says the $2.25 trillion industry was an easier place for wealthy individuals to make money a decade ago. Funds were smaller, returns were higher and managers did more to cultivate the support of those well-heeled individuals and families because large institutions like pension funds had yet to embrace the industry.
http://jlne.ws/1824R5v
***DA: Not sure the article gave a good reason as to why the allure exists. It spoke more of high fees and a plethora of funds watering down alpha generation.

House of AlphaMetrix falls hard and fast
Futures Magazine
Inc. 500, 2010. Crain’s Fast Fifty, 2011. Crain’s Fast Fifty, 2012. AlphaMetrix Group LLC, Chicago, appeared to be a company going places fast. That is, until 2013, when the self-described “Marketplace for Private Investments” found itself on the very top of lists belonging to the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). AlphaMetrix, which boasted a five-year growth rate of 8,030.4% in Crain’s Chicago Business 2011 Fast Fifty issue, now faces CFTC charges alleging that the firm committed fraud and misappropriated at least $2.8 million that belonged to pool participants.
http://jlne.ws/1eOJWYN

Does Chart Analysis Really Work?
Ewen Chew  – MoneyBeat – WSJ
Stochastics, moving averages, standard deviations – fancy charting terms you may have heard of. But do they really predict price movements? Or are they mathematical mumbo jumbo?
http://jlne.ws/1824QhZ
***JM: Technical indicators have great value, but not as predictors; it’s funny to me how people stay stuck on needing to predict, rather than react.

John Paulson’s Funds Clock Strong Returns in 2013
Maureen Farrell  – MoneyBeat – WSJ
So far 2013 has been a comeback year for John Paulson. The hedge-fund manager, best known for his huge win betting against the housing market ahead of the financial crisis, boasted year-to-date returns between 15% and 45% for every fund except gold among his $19 billion of assets under management, according to a source familiar with the fund’s performance.
http://jlne.ws/1824R5w

Money funds at risk of big drop in assets
Christopher Thompson in London and Stephen Foley in New York – FT.com
Global money market funds are projected to lose around a third of their assets under management next year as the combined forces of record low interest rates and new regulations batter the multi-trillion dollar industry.
http://jlne.ws/1jrZMIW
***DA: It’s December 2. Do you know where your cash is?

Worst Raw-Material Slump Since ’08 Seen Deepening: Commodities
Bloomberg
The commodity slump that spurred bear markets in everything from gold to corn to sugar this year will deepen by the end of December as prices head for their first annual loss since 2008, if history is any guide. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell in December 83 percent of the time since 1971 when the benchmark gauge was posting losses for the year through November, data compiled by Bloomberg show. The average December loss was 3.9 percent, which if it happened this time would mean a 7.8 percent drop for the year.
http://jlne.ws/1b8T3Tr

Japanese pension fund execs hear ideas for investing in low-interest-rate environment
Pensions&Investments
Japanese pension fund executives came together in Tokyo with money managers and others to hear conceptual and practical ideas about different asset classes and techniques available for managing their funds in a very low-interest-rate environment, where rates are expected to rise and
http://jlne.ws/19de1MR
***DA: I’m listening as well.

Managed Futures / Managed Funds

Data Fees Kick CTAs and IBs When They’re Down
Dan Collins Report, via Options Insider 
We reported on the poor timing of the increase in exchange and data fees by CME Group two weeks ago but the full impact, particularly of the data fees, is just coming into focus and market participants are seeing sticker shock. While no one likes a tax increase, which this basically is, people tend to accept it and move on. However, the data fees announced by CME Group stand to have a much larger impact, particularly for so-called professional traders that includes anyone with a registration, i.e. introducing brokers  (IBs), Commodity trading advisors (CTAs), floor brokers, associated persons etc. 
http://jlne.ws/1fK3jFl
***DA: This may not be the end of the story. Read on: 

CME Group hears complaints, may tweak planned fee hikes -broker
Reuters
CME Group Inc, the world’s largest futures exchange operator, may consider minor modifications to its plan to raise fees for traders in response to complaints from customers, a futures executive who met with company officials said on Friday.
http://jlne.ws/1824Qi6
***DA: The only way to gauge willingness to pay (WTP) is to raise prices until you find the equilibrium. Maybe they will adopt the Kohl’s model, where you raise prices, but then always have a sale going on – “Order CME Data Services now through Feb. 28 and receive a 40 percent discount off MSRP.”

Control Portfolio Risk with Managed Futures ETFs
ETF Trends
Investors are beginning to understand the risks in the markets. Consequently, more are considering alternative investment strategies, like managed futures exchange traded funds, to help diminish risk exposure and enhance risk-adjusted returns.
http://jlne.ws/IF0aZM

361 Managed Futures Strategy Fund Recognized by HFMWeek
PRWeb
361 Capital, an asset management firm specializing in liquid alternative investments, announced today that its 361 Managed Futures Strategy Fund was recently recognized as the “Best Newcomer – Managed Futures (CTA)” at the HFMWeek U.S. Performance Awards 2013 in New York City.
http://jlne.ws/1bapbVR

Carlyle to Buy Firm That Invests in Hedge Funds
Gregory Zuckerman – WSJ.com
Carlyle Group LP said it will acquire Diversified Global Asset Management Corp., a Toronto-based investor in hedge funds, as the firm continues to expand from private equity.
http://jlne.ws/1dy4ebH

Small FoHF proves experience and nimbleness produce performance
Emma Cusworth – Risk.net
Headstart Fund of Funds managed by Headstart Advisers has coped through different and challenging market environments. It now hopes to grow assets through a more diverse client base
http://jlne.ws/1dy4ebK

Pensions & Institutions

Investor demand drives move to alternative mutual funds
Financial Times, via CNBC
As pension funds, endowments and charities clamour for access to hedge fund strategies that are cheap, transparent and liquid, US hedge fund managers are rushing to meet their requests by rolling-out alternative mutual funds. An American version of the “hedge-fund lite” Ucits funds popular in Europe – so-called liquid alternative funds, registered under the Investment Company Act of 1940 – is in vogue.
http://jlne.ws/1bam1kZ

Consider climate change and the forecast for commodities
Investment News
Advisers can’t afford to ignore the potential impact of climate changes on their clients’ portfolios.
http://jlne.ws/1hsLQle

Ireland’s pensions still grappling with enforced austerity
Mark Cobley – Financial News
Four years on from the start of Ireland’s financial and banking crisis, the country’s EUR80 billion pension fund sector is still under serious pressure. But with a controversial fund levy set to continue for another year at least, and new funding regulations in the pipeline, the challenges are not going away.
http://jlne.ws/Iw8dI8

Carlyle to Buy Firm That Invests in Hedge Funds
Gregory Zuckerman – WSJ.com
Carlyle Group LP said it will acquire Diversified Global Asset Management Corp., a Toronto-based investor in hedge funds, as the firm continues to expand from private equity.
http://jlne.ws/1dy4ebH

Preqin: Fewer institutions taking chance on emerging hedge fund managers
Pensions&Investments
Institutional investors are losing their appetite for emerging hedge fund managers, Preqin said in its November report on emerging hedge funds. The alternatives research firm said 38% of institutions indicated a willingness to invest with young firms this year vs. 42% in 2012 and 48% in 2011, according to Preqin.
http://jlne.ws/18xWpkt

Regulation

AIFMD for Americans: What US & Non-EU managers need to do to comply
AllAboutAlpha 
AIFMD can be confusing for those of us in Europe so it is not surprising that the regulation has caused plenty of head scratching across the Atlantic. This white paper provides a clear guide to what US (and Asian managers) need to do to comply with the AIFMD regulations. This is vital if they want to be able to continue marketing their funds into the huge European market. 
http://jlne.ws/1jba4zP

CFTC Proposed Rule: Membership in a Registered Futures Association
MarketsReformWiki
On November 5, 2013, the CFTC proposed a rule that would require that all persons registered with the Commission as introducing brokers (IBs), commodity pool operators (CPOs), and commodity trading advisors (CTAs) become and remain members of at least one registered futures association (RFA). Currently, the National Futures Association (NFA) is the only RFA.
http://jlne.ws/1bdcSVe

Futures Industry Releases Insurance Study
NFA
CME Group, Futures Industry Association, the Institute for Financial Markets and National Futures Association announced the release of a study on the economic feasibility of adopting an insurance regime for the U.S. futures industry. The study was commissioned by the four sponsoring organizations in November 2012 and was conducted by Compass Lexecon, a consulting firm that specializes in the application of economics to legal, regulatory, and policy issues. Christopher L. Culp, an expert on risk management with extensive consulting experience in both insurance and derivatives, led the team that conducted the study.
http://jlne.ws/1baHVED

 

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