Observations/Commentary

Open Spaces: Coquest Looks to Expand in Managed Futures
Jim Kharouf – John Lothian News

Coquest is making a bigger push into the managed futures space.

The firm, which announced the addition of Max Eagye as managing director last week to further expand its managed futures business, sees an opportunity to grow within the space with individual investors, complementing its client base of high net-worth individuals and institutions.

John Vassallo, who co-founded Coquest with Dennis Weinman 25 years ago, said the potential for the space is still strong. The firm bought a 50 percent stake in a managed futures broker called Mega Capital six years ago and purchased the rest of the company last year.

“Time and time again, managed futures has shown that it does play a role in a portfolio,” Vassallo said. “Since 2008, we have seen some large investors invest in the managed futures space. And what we’ve seen over the past year is more non-correlation, more volatility. As investors, we have to invest bravely.”

Read the rest of the article at JohnLothianNews.com

Blair Hull – Getting the Edge: Blackjack and the S&P 500
JohnLothianNews.com

“What you need to be is persistent and disciplined in your strategy.”

Blair Hull, founder and managing partner at Ketchum Trading, compares the similarities of playing Blackjack with trading the S&P 500. Hull is not only an experienced Blackjack player, but also has about 40 years of experience in the financial industry. He says that both Blackjack and trading can be approached using a similar strategy. Hull continues his explanation with diagrams and numbers to be aware of during the Blackjack and trading process and even correlates the deck of cards with amounts of dollars made per trade.
Watch the video »

NIBA SoCal 2015 Conference
February 19, 2014 – National Introducing Brokers Association
Newport Beach Marriott Hotel
900 Newport Center Drive, Newport Beach, CA 9266
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RCM Alternatives And Clinton Group Hosting Free Panel Discussion On Alternative Investments In Louisville
Vincenzo’s Italian Restaurant, 150 South 5th St., in Louisville, Ky. at 5:00 p.m.
Geared toward RIAs, wealth managers and high net-worth investors

Lead Stories

CTAs begin 2015 with a stellar January
Societe Generale
All Newedge indices posted positive returns in January continuing the strong run observed in 2014.
Societe Generale Corporate & Investment Banking announces the January performance data for its Newedge CTA performance indices. Managed futures started the year positively, following on from the strong performance achieved in the second half of 2014. All Newedge’s indices enjoyed positive monthly returns for the sixth consecutive month.
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***DA: Trending is trending.

Eurekahedge: Hedge Funds Gain 1.43% In January
FINalternatives
Hedge funds gained 1.43% in January, according to the Eurekahedge Hedge Fund Index. Large hedge funds outperformed underlying markets as heavyweights shone with the Eurekahedge Billion Dollar Hedge Fund Index up 1.79% during the month.
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And The Grammy Goes to…
Automated Trader
Well no, TT did not win anything at the Grammys. We did, however, take home both “Best Trading and Execution Technology” at the HFM U.S. Technology Awards and “Best Overall Technology” at the CTA U.S. Services Awards.
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Managed Futures: Let the Good Trends Roll
Attain Capital, via ValueWalk
Managed Futures managers might as well be singing Louis Jordan’s 1940’s original “Let the Good (Trends) Roll,” after the first month of 2015 came to a close. Forgive us for our artistic interpretation of the famous song, we just thought it captured the current environment. Now, any trend follower will tell you there is no such thing as a “bad” trend, just the lack of consistent trends. That hasn’t been an issue over the past couple of months.
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Managed futures requires cautious approach
Money Management
The use of managed futures as an alternative asset investment should be approached with caution due to their recent volatility and the likelihood they may be exposed to price movements in the bond market.
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***DA: I like that. One’s alternative portfolio is in danger of being upended by volatility in one’s traditional portfolio.

3 Alt Investments That Deserve an Oscar: Morningstar
ThinkAdvisor
Love them or hate them, some funds — much like critically acclaimed film characters — keep investors at the edge of their seats. Morningstar’s Josh Charlson compares a few top-performing funds to movies in a recent online report.
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Rats of Wall Street: Rodents taught to trade in foreign exchange markets
RT News
Believe it or not, ‘Rattraders’ is an actual experiment that teaches lab rats to trade in the foreign exchange and commodity futures markets – and in some cases, the rodents outperform the world’s leading fund managers.
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***DA: Key quote from the article: “Monkeys and rats have a certain advantage over humans, and that is they do not read the newspaper and do not look into the news, and they do not get fooled by that; they really just look for randomness or technical signals.”

Managed Futures/Managed Funds

Why Dumb Investors Make More Money Than Smart Investors
The 10th Man, via Equities.com
The buzz has been building on this trade for weeks. Clients, friends, people on Twitter, everyone I know has been waiting for a chance to pick the bottom in oil. I’ve heard all this chatter on which triple-leveraged oil ETFs to use (I make a point of not knowing such things). They’ve been waiting for this opportunity since oil was at 80 bucks. Interestingly, they could have shorted it when it was at 80. Actually, they could have shorted it at 110. Or 100. Or 90. Or 80. Or 70. Or 60. Or 50. They could have shorted it at 50 and still made money.
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***DA: Perhaps the best advertorial on managed futures ever.

Hedge Funds Focused on Currencies Get Big Payoff; January Was Big Winner for Firms, Especially Those Driven by Algorithms
By Carolyn Cui And Ira Iosebashvili, WSJ
Currency markets are finally giving hedge funds some bang for their buck. Thanks to a consistently soaring dollar—and plunging euro—investment funds focused on currencies had the best month in years in January.
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Hedge Funds Keep Winning Despite Losing; How Do They Keep Winning Clients? Maybe It’s About Job Security.
By Gregory Zuckerman, WSJ
Hedge funds are in a six-year slump. Financial markets have been rising but these highly paid investors can’t seem to keep up. It’s getting so bad, hedge funds are starting to draw comparisons to mutual funds, long criticized for poor performance relative to their fees. It’s a bit like saying Ferraris are starting to resemble Fords.
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A rising appetite for risk isn’t luring smart money back to the oil patch
By Shawn Langlois, MarketWatch
Risky is Madonna flashing her 56-year-old assets at the Grammys. Perhaps riskier still is taking crude’s recent spurt to the upside as a reason to pour money back into the energy sector. At least that’s what the hedge fund guys seem to be saying as they load up on bearish bets heading into this week (see call of the day).
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Fund managers await clarity on cost disclosure rules
Investment Week
European rules requiring greater disclosure of portfolio costs could apply to fund managers sooner than expected if regulators decide to clear up inconsistencies in existing sets of proposals.
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Pensions & Institutions

Canada pension fund manager sees opportunity in volatility
Reuters
The Canada Pension Plan Investment Board (CPPIB), one of the world’s biggest dealmakers, expects to find more acquisition opportunities in the months ahead as global market volatility plays to its advantage, its chief executive said on Friday.
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Pensions accounting: do we really need more change?
Financial Director Opinion
It is only a couple of years since the latest amendments to the accounting for pension liabilities under International Financial Reporting Standards (IFRS) became effective, but the International Accounting Standards Board (IASB) recently announced a new project. You may wonder whether this is necessary. I think it is.
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***DA: A moving target.

Fund Pros Who Live Together, Buy Together; Study Suggests Managers Are Influenced by Investments of Peers Who Are ‘Neighbors’
By Chris Gay, WSJ
It is no surprise that fund managers make portfolio choices for reasons other than dispassionate financial analysis. Studies suggest they invest in companies with headquarters nearby and with ties to their old schools, and for reasons related to politics and religion.
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***DA: All that time and money spent on conferences and networking events, and all I really needed to do was buy a mansion in Connecticut.

DC plan assets continue march toward dominance globally
Employee Benefit News
The rest of the world is following the U.S. lead in embracing the defined contribution model of retirement savings plans, with America’s employer-sponsored plans taking a huge share of global assets. And with those huge assets come huge risks, according to analysts.
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***DA: Far better to shift the risk onto middle class workers.

Hedge funds, an amazing investment paradox
Chicago Tribune
Earlier this week, Greg Zuckerman of the Wall Street Journal pointed out one of the great mysteries of today’s investment landscape: Despite underperforming by a substantial margin, hedge funds keep attracting more investors and assets under management. It is almost as if (to borrow the headline on Zuckerman’s article), “Hedge Funds Keep Winning Despite Losing.” http://jlne.ws/1uZpe4i

U.S., Global Pension Fund Assets Reach New Highs, Study Finds
AnnuityNews
Assets at U.S. institutional pension funds increased 9% in 2014, to a record $22.1 trillion, according to Towers Watson’s annual Global Pension Assets Study. Globally, institutional pension fund assets in the 16 major markets grew by over 6% during 2014 (compared to around 10% in 2013) to reach a new high of $36 trillion, according to the research. The growth is a continuation of a trend that started in 2009, when assets grew 18%, in sharp contrast to a 22% decline during 2008, when assets fell to around $20 trillion. Global pension fund assets have now grown at an average annual rate of 6% since 2004.
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Guest Column: Root of pension problem troubling
The Sentinel
In September 2006, then-Auditor General Jack Wagner filed a special performance audit of the investment operations of the pension funds. Reports were done and direction was given to avoid any future financial crisis. He also gave 33 recommendations that would be a good first step toward averting any crisis. One of Wagner’s concerns was that the board and investment bankers follow the Prudent Person Rule. They were: take into consideration probable income, the safety of the capital it was invested in, and not use speculation or high risk investments.
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Private equity feels squeeze from junk loan crackdown
Reuters
Big private equity deals have fallen through or had to be reworked in recent weeks because many banks, under U.S. regulatory pressure to reduce their risk-taking, are no longer willing to provide as much debt as their clients want. Last month, a potential $7 billion acquisition of Canadian satellite company Telesat Holdings Inc by Ontario Teachers’ Pension Plan and Public Sector Pension Investment Board was scuppered by financing issues, according to people familiar with the matter.
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Regulation

U.S. Bank to pay $18 million to end CFTC’s Peregrine case
Bloomberg via Crain’s Chicago Business
U.S. Bank NA agreed to pay $18 million to end a federal regulator’s lawsuit over its handling of funds belonging to clients of Peregrine Financial Group Inc., an Iowa futures trading firm that collapsed in a $200 million fraud that sent its founder to prison after a suicide attempt.
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US Regulators Look at Tightening Leverage Ratios for Overseas Customers
by Kenny Mariasin – Forex Magnates
CFTC Chairman Timothy Massad on Wednesday told lawmakers at a House hearing that the regulatory commission is considering how much firms can expose themselves to highly-leveraged trades made by clients outside the US.
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Congressman Says CFTC Wastes Money
Ted Knutson, Financial Advisor
The Commodity Futures Trading Commission hasn’t reduced risks to the financial system since the financial crisis despite a 123 percent budget increase, Alabama Rep. Robert Aderholt, chair of the House Appropriations Subcommittee overseeing CFTC spending, said Wednesday.
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Important notice to CPOs regarding changes to EasyFile for filing annual pool financial statements
NFA
In order to review pool financial statements more efficiently, NFA is making a few minor modifications to its EasyFile system. These changes are effective for all outstanding pool financial statements dated after Nov. 29, 2014.
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