Observations/Commentary

Share Your Secret Sauce! Alan Synder Says Emerging Managers Should Provide More Details
JohnLothianNews.com
Fund managers are faced with a myriad of challenges from trading and risk management to compliance and operating a business. But the challenge of marketing and raising money can be most daunting of all.

Jim Kharouf, editor-in-chief of John Lothian News, spoke with Alan Snyder, managing partner of Shinnecock Group, who says there are several keys to attracting and keeping institutional investors, and one of them is “sharing your secret sauce.”

Snyder said that providing deeper information about how a fund trades is part of the real key in the sales process – engendering trust.

Watch the video »

The New Frontier: Born Technology’s Haworth Says Price Now Matters in Technology and HFT
JohnLothianNews.com
Today’s markets are often touted as “all about speed”, but that reach for low latency is only part of a successful strategy. Derek Haworth, president of Born Technology Solutions says that more firms are looking to cut costs on technology, such as exchange connectivity and order book solutions. For his clients, its about finding the balance between financial technology and expenses.

“What we’ve been seeing over the course of the past year, year and a half, is that people are moving toward what I would call smart latency,” Haworth said, “where there is an understanding that spending an extra $100,000 to shave off another 200 nano-seconds isn’t really commercially or economically feasible. So we’re seeing the pendulum swing a little away from the lowest latency trade.”

Watch the video »

Stocks – We Hope they Go to Zero!
Attain Capital Management
One of the best things about being in an investment which can do well when markets are down is the fun you can have at cocktail parties, in the locker room at the golf club, and dinner with friends. A -334 point down day in the Dow and around -5% move off of all time highs starts to bring out the shrugs and exasperated expressions, as those well to do’s around you murmur their version of the timeless classic
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***DA: As the office permabear, my colleagues are convinced that I ghost-wrote this piece for Attain. I try to explain there are plenty of us out there.

Lead Stories

Which Direxion for 40 Act Funds
Jim Kharouf – John Lothian News
The question for many in the managed futures industry at the CTA Expo in Chicago last month was where the next opportunity will come from.
Several years now into the next big thing – managed futures mutual funds or 40 Act Funds – there is great hope and great potential for the product, depending on who you speak with. It could be the product that zaps the managed futures industry out of its doldrums and finally brings this sector into the mainstream investing circle in a big way. Others see wrinkles in the product that need to be ironed out.
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Newedge: CTAs extend positive performance run into September
Automated Trader
Newedge, a provider of multi-asset brokerage and clearing, has announced the September performance data for its CTA performance indices.
September saw all the Newedge managed futures indices continue the positive momentum seen in August, with positive returns posted across the board for the second month in a row. The strong post-summer period for CTAs means that the Newedge indices remain in the black for 2014 YTD.
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***DA: A trend I am happy to follow.

TeraExchange Completes First Bitcoin Derivatives Trade On Regulated Exchange
TeraExchange announced today the first bitcoin derivative transaction to be executed on a regulated exchange. The initial trade was completed between digitalBTC, the world’s first bitcoin-focused company to commence trading on a major stock exchange, and a hedging counterparty.
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***DA: CTAs: are you watching this development? Could be the next green pasture.

Winton Capital Down in September? What Happened?
Attain Capital via ValueWalk
We’re probably at risk of not getting that David Harding interview next time he’s in town… but we just can’t help but wonder aloud what happened with Winton in September. The estimate we’re seeing for their September performance is a negative -0.72% (and that would be their program performance, not the performance of the super high fee product you’re accessing them through).
While that’s hardly reason to sound the alarm, and Winton remains up +1.83% on the year; we’re talking the biggest player in the managed futures space being down in one of the biggest up months for managed futures in a few years (Q3 was the best quarter for managed futures since the hey days in 2008). What happened?
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Managed Futures/Managed Funds

Bacon toasts sizzling year in Europe
Vivek Ahuja – Financial News
The departure of star fund manager Greg Coffey from Moore Capital Management in late 2012 did not prevent profits at the hedge fund manager’s European arm from surging last year to their highest level since 2009.
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***DA: Bacon, sizzle, toast – how about some eggs and hash browns while we’re at it.

Bill Gross, in His ‘Second Life,’ Strikes a Gloomy Note
William Alden – Dealbook – NY Times
William H. Gross, the co-founder of the mutual fund giant Pimco who abruptly quit last month to join a much smaller mutual fund company, has in the past peppered his market commentary with upbeat and zany humor.
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***DA: Want us to really make us laugh, Bill? Re-grow that silly mustache.

A Well Timed Managed Futures ETF Launches
ETF.com
So-called alternative strategies hold more appeal when the outlook for performance in conventional asset classes looks rocky. With volatility returning to equities, a nagging fear of rising rates hanging over bonds and a cruel summer for commodities, that time may be now.
A recent ETF launch got me thinking about one alternative strategy in particular: managed futures. Managed-futures funds make directional bets about the price movements of commodities, currency and fixed income.
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Have Managed Futures Funds Turned a Corner?
Chief Investment Officer
After two years of redemptions and underperformance, one hedge fund strategy has seen a mini-revival.
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Commodity ETF Traders Have to Be Picky
ETF Trends
With the U.S. dollar strengthening and global growth concerns lingering, the commodities market have stumbled. Nevertheless, traders can still find some opportunities, but they will have to target single commodity-specific exchange traded funds.
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Pensions & Institutions

State Pension Gaps Shrink for First Time Since 2007: Muni Credit
Bloomberg
U.S. state pension plans are strengthening for the first time in six years as rising contributions and rallying stocks ease a fiscal strain that’s vexed municipal leaders since the recession.
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In Ruling on California Town’s Bankruptcy, Judge Challenges Sanctity of Pensions
Mary Williams Walsh – Dealbook – NY Times
A federal bankruptcy judge on Wednesday upended the widely held belief that public workers’ pensions have a special status in California that makes them impossible to cut, further chipping away at the idea that pensions are sacrosanct in a municipal bankruptcy.
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***DA: If the taxpayer backstop is called into question, it could lead to a global repricing of munis everywhere.

Old Mutual Wealth scraps drawdown fee and minimum investment charge
Anna Fedorova – Investment Week
Old Mutual Wealth is removing the annual pension drawdown fee and scrapping the current minimum charge on its platform in order to simplify its charging structure.
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The CalPERS Decision and the Rise of Liquid Alts
Morningstar
There’s more than meets the eye to CalPERS’ decision to jettison hedge funds. http://jlne.ws/1z2fTK8

Moody’s pension report termed ‘unrealistic, misleading’
Benefits Pro
The National Association of State Retirement Administrators has sent a letter to Moody’s Investor Service expressing “deep concern” about the methods used by the ratings agency to estimate the unfunded liabilities of the nation’s public funds.
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Alternative Assets Top $5.7 Trillion
FINalternatives
Total global alternative assets under management have hit $5.7 trillion, according to new research from Towers Watson.
In its latest Global Alternatives Survey, the data provider examines seven alternative asset classes—hedge funds, private equity, real estate, infrastructure, commodities, real assets and illiquid credit, the latter two appearing for the first time this year.
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San Francisco pension fund puts off hedge fund vote – Retirement system might drop PIMCO because of Gross departure
Pensions&Investments
San Francisco City & County Employees’ Retirement System, amid a contentious board meeting, again put off a vote Wednesday on whether to allocate 15% of the pension fund’s $20.1 billion to hedge funds.
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Regulation

NFA Issues Notice Regarding CPO and CTA Reports and Filing Requirements
Katten Muchin Rosenman LLP
On October 1, National Futures Association issued Notice to Members I-14-26 informing commodity pool operators (CPOs) of changes to Form PQR and to remind member CPOs and commodity trading advisors (CTAs) to file required reports in a timely manner. NFA has made minor technical changes to Form PQR, which are available here. These changes became effective September 30; the updated Form PQR will be available in the EasyFile system on October 6. The CTA Form PR remains unchanged.
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Turf War Pushed CFTC to Embarrassing Amaranth Deal, Senators Say
Silla Brush – Bloomberg
The main U.S. derivatives regulator undermined a government probe into a trader’s alleged rigging of an energy market and imposed an embarrassing $750,000 fine to settle the case, three Democratic senators said in a letter.
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CFTC’s Wetjen urges fix to commodity options problem
Alexander Osipovich – Risk.net
A member of the US Commodity Futures Trading Commission (CFTC) has called for the agency to take action on an issue stemming from its Dodd-Frank Act regulations, which has bedevilled energy companies for the past two years.
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‘Closet index trackers’ must be outed, regulators urged
Andrew Pearce – Financial News
Fund managers charging high fees for active management while effectively following much cheaper passive strategies must be exposed, UK and European financial regulators have been urged.
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Look Who’s ‘Trading’ Commodities
Jason Zweig – MoneyBeat – WSJ
In the government’s bid to crack down on risky trading, charities and other nonprofit organizations may become collateral damage. That is causing alarm in the nonprofit world and should be a concern for donors. Under new rules, your local charity could be obligated to register with federal regulators as a commodity-pool operator—even if it doesn’t invest directly in corn or pork bellies.
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No room for complacency in AIFMD challenge
Emma Cusworth – Financial News
“What’s to come is unsure. In delay there lies no plenty”. The Fool in Shakespeare’s comedy Twelfth Night may have been referring to affairs of the heart but his message was universal: don’t delay because you never know what may happen tomorrow. Fund managers, too, would do well to heed this warning when it comes to preparing for the Alternative Investment Fund Managers Directive.
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