Observations/Commentary

Spelling It Out: Esther Goodman’s Tips For Emerging Managers
JohnLothianNews.com
When Esther and Mark Goodman took time off after departing Kenmar Group, the couple decided they wanted to help funds and managers grow their businesses.

The Goodman’s started Conyers Group, and now serve as directors for some funds, work with emerging managers and are also seeking to add their expertise to 40-act funds.

Esther Goodman, who spoke with John Lothian News editor-in-chief Jim Kharouf, said the potential for emerging managers is very positive – discretionary or technical – as long as they can differentiate themselves from the pack.

“I think the future is very bright for small managers, niche players, who are doing something very different than what’s out there today,” she said. “Anything except a technical trend following system. I just don’t think there is a lot of room today for building a big business as a long-term trend trader.”

Watch the video »

Emerging Manager Forum Miami, Dec 9
CTA Expo
The final 2014 event on the CTA Expo slate is happening December 9 at the iconic Hotel Fontainebleau in Miami – the third annual Emerging Manager Forum, an opportunity for money raisers and asset allocators to meet and discover fund managers and promote alternative investing. Panels, presentations and networking. Follow the link to learn more and register.
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Lead Stories

Newedge Commodity CTA Index Crosses 20% in Year-to-Date Performance
Press release
Overall results were in the green as managers embraced the recent tide in global markets. The firm saw a sharp U-turn in trend following strategies contributing the most to the increase in performance. Newedge’s Trend Index returned +1.76% for the month, in addition, the Newedge Trend Indicator posted positive data, showing +1.83% for October, thus bringing the current year’s performance above the formidable twenty percent market to +20.29%.
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***DA: This trend has been a friend.

Autumn volatility puts managed futures top in class
By Sarah Krouse – Financial News
Managed futures hedge funds continued a strong run in October as positive returns, helped by the uptick in volatility, made the strategy the best performer for the year-to-date.
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TrimTabs and BarclayHedge Report Hedge Funds Redeem $5.1 Billion in September but Outperform S&P 500
BarclayHedge
BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry redeemed $5.1 billion (0.2% of assets) in September, the largest outflow since December 2013 and only the second outflow this year.
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CFTC fines broker Rosenthal Collins $700,000 for violations
Reuters
The U.S. Commodity Futures Trading Commission fined futures broker Rosenthal Collins Group $700,000 for failing to oversee an employee in a branch office over five years, the agency said on Thursday.
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***DA: Another example of how hard it is to run a small independent FCM these days. Old revenue streams such as interest float cannot be counted upon, and the implementation costs of new regulations and technologies have added further pressure. Now, what looks to be a relatively minor compliance lapse at a branch office is a $700,000 mistake.

Will HFTs force a market redesign?
Ginger Szala – AllAboutAlpha:
Notwithstanding the evident benefits of HFT in electronic markets, many market participants have argued that some HFT practitioners utilize trading techniques that are detrimental to the well-functioning of financial markets. Some of the trading techniques are spoofing, layering, and quote stuffing.
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Managed Futures/Managed Funds

How the dumb money was set up for commodity failure
Financial Times
As Mostaque explains, even though commodities are at double the level they were in 2003, any investors who assigned money to commodity GSCI products in that period on a total return basis may be sitting on zero returns.
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**JK – An interesting look at the S&P GSCI Total Return index – not much of a return.

Hedge funds extend streak of poor performance
Financial Times
It seems like the so-called smart money was bruised badly by the October gyrations in markets.
For the sixth month this year*, hedge funds have posted negative returns in aggregate, according to the Eurekahedge Hedge Fund Index.
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Finex preparing US CTA launch
By Matt Smith – CTA Intelligence
London-based investment manager Finex is preparing to launch its systematic managed futures strategy as a US CTA.
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Hedge Funds Down Six Months In A Row, Asia ex-Japan Out-Performs
HedgeCo.Net
CTA/managed futures strategies were the top gainer during October, gaining 0.26% and maintaining their lead over all other strategies with year-to-date returns of 6.30%.
Hedge funds posted their second consecutive month of negative returns in October with the Eurekahedge Hedge Fund Index down 0.24% while the MSCI World Index finished the month up 1.15%.
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***DA: And the response has been that money is flowing the wrong way.

Hedge fund Lonestar Capital to shut down
Rob Copeland, The Wall Street Journal
The market’s jittery turn this fall has claimed its biggest hedge-fund casualty to date, as Lonestar Capital Management will shut down after being whipsawed in October, according to people familiar with the firm.
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Commodity Slide Boosts Returns
CTA Intelligence
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**Red Rock Capital mentioned for its move in silver.

Equinox Launches Liquid Alts. Fund Run By CTA Aspect
FINalternatives
Equinox Funds has launched a liquid alternatives mutual fund run by Aspect Capital, a London-based commodity trading advisor.
The Equinox Aspect Core Diversified Strategy Fund deploys a mid-term trend following strategy developed by Aspect. The fund seeks to quantitatively identify and profit from price moves in highly liquid and diverse futures markets across global asset classes.
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Christopher Cruden Interview with Michael Covel
Michael Covel
Michael Covel speaks with Christopher Cruden on today’s podcast. Cruden has been in the trend following space for over 25 years. In 1988 he became a Director of Adam, Harding and Lueck Asset Management Ltd (AHL) in London, a famed trend following shop. He is currently the head of Insch Capital Management. Covel and Cruden discuss why price is an unimpeachable fact
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Mark Whitmore, Whitmore Capital Management – How to Startup a Capital Management Firm
Top Traders Unplugged
“Investing in some ways is unbelievably complex, and in other ways it’s literally as easy as buy low and sell high.” – Mark Whitmore (Tweet) In the second part of our conversation with the founder of Whitmore Capital Management, we learn the daily challenges, and lessons learned right from the founder and owner of a fledgling firm….
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O’Connor Hedge Fund Scores Gains Where Prop Desks Exited
Jon Asmundsson – Bloomberg
Dawn Fitzpatrick wanted to be a trader. As a student at the University of Pennsylvania’s Wharton School back in 1992, that meant one thing: landing a job at Chicago-based O’Connor & Associates. “O’Connor was the only place I wanted to work — and the only place I interviewed,” Fitzpatrick, 44, says. She was hired in her senior year.
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Pensions & Institutions

South Carolina Wants Smaller Hedge Fund Managers
Valuewalk.com
Pension system invites hedge funds to “show up” at public meeting and “shake hands” and “hand out business cards”
There has been an ongoing academic debate in the hedge fund industry as to what size fund generates the best performance, large or small hedge funds. Now South Carolina’s pension system is weighing in on the issue.
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University of California Defies Calpers on Hedge Funds
Bloomberg
The University of California has increased its hedge-fund holdings by a factor of 10 since 2004, even as the California Public Employees’ Retirement System, the largest U.S. pension, said it’s pulling all $4 billion it had in such investments because they’re too complex and too expensive.
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Report lists ‘double dippers’ with NY pensions
Businessweek.com
The Empire Center reported Monday that 665 retired public workers in New York had authorization this year to “double dip” and keep collecting pensions while getting paid for jobs after returning to work in the public sector.
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US fund managers ‘more focused on flows than returns’
Julia Rampen – Investment Week
US fund managers have “failed” their clients by focusing on preserving their careers rather than growing clients’ capital, according to Baillie Gifford’s Ian Tabberer.
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***DA: Some years you live off the 2; other years you live off the 20.

Wealth managers look to boutiques in hunt for quality active management
Alice Rigby – Investment Week
Fund selectors are increasingly favouring boutique investment houses and rejecting star managers, according to a survey by distribution company Harrington Cooper.
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***DA: The trend has not hurt Bill Gross, though.

Guess How Much Money Bill Gross Made Last Year?
Barry Ritholtz – Bloomberg
How much compensation the folks at Pacific Investment Management Co., better known as Pimco, haul in each year has always been a topic of fascination on Wall Street.
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Fewer active managers beat market than at any time in decade
Stephen Foley in New York – Financial Times
Fewer fund managers are beating the market this year than at any time in over a decade, piling further misery on a profession that faces increasing investor scepticism.
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Regulation

CFTC Staff Issues No-Action Position and Interpretations Addressing the Holding of Customer Funds
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The Gensler Clean-Up
WSJ
Even Obama appointees are beginning to acknowledge the damage from the Obama wave of financial regulation. Witness the Commodity Futures Trading Commission, where regulators are starting a modest retreat from derivatives rules the agency has been rolling out since Dodd-Frank passed in 2010.
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Regulators Consider Easing Volcker Trading Rules
Cheyenne Hopkins and Ian Katz – Bloomberg
U.S. regulators are considering changes to the Dodd-Frank law that could ease requirements on the Volcker Rule’s trading restrictions.
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CFTC Turns Toward Administrative Judges
Jean Eaglesham – WSJ
The Commodity Futures Trading Commission plans to start steering some of its cases against trading firms, brokers and others to administrative law judges appointed by federal agencies, instead of trials in federal court, according to a top official.
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