Observations/Commentary

New Yawk City: CTA Expo Takes A Big Bite
CTA Expo, the New York edition, was another hit this year with more than 400 guests in attendance. Highlighting the one-day event was Jack Schwager, the well-known author of the Market Wizard books and industry analyst, fund manager and now entrepreneur who received the CTA Expo Lifetime Achievement Award. Schwager outlined the biggest changes he’s experienced since he came to the futures industry in 1971. Besides the disappearance of the trading floors, he noted that price transmission or dissemination has contributed strongly to the growth of these markets. Financial futures and of course the expansion and evolution of technology has created a worldwide infrastructure, the lowering of commissions, which he recalled, were around $90 back in the day.

And there was the rise of the fund managers, many of which he interviewed and shared their knowledge in his books. Schwager said the most important thing about funds today isn’t trading strategy, but risk management and the simple maxim – “Know where to get out before you get in.”

Schwager has also partnered on a new initiative with Emanuel Balarie called Fundseeder – an online platform which aims to find traders around the globe, post their returns from their brokers, provide analytic tools and eventually pair them up with investors. Now in beta mode, the platform has attracted traders from about 60 countries and possibly the next generation of Market Wizards.

5 Thoughts on NASDAQ 5,000
Attain Capital Managed Futures Blog
We wanted to wait for the dust to settle a little bit before diving into the NASDAQ hitting a new all-time high, and after all – we’ve been waiting 15 years for it to happen, so what’s a few more days. This is sort of like the lady who didn’t train for a marathon finishing 6 hours after the winners. Although nobody shows up to shower her with press, this is a reason for celebration in the financial press! Here’s our quick thoughts on something that took forever to happen.
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We Thought Our Pay Would Be Higher, Wall Streeters Say in Poll
Bloomberg Business
Ask Main Street about Wall Street and you probably won’t hear this: Banker pay is surprisingly low. But that’s what financial professionals say. Asked whether they earn more or less than they expected when they decided to pursue a finance career, 48 percent of respondents in the Bloomberg Markets Global Poll say compensation is less or much less than they had hoped for.
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***DA: I came to Wall St. figuring I would gain the world but lose my soul. Turns out I just lost my soul.

Six Key Variables To Trading A Money Manager Knows That You May Not
Inside Futures
Most professional CTAs look and think about trading in a much different way than an average trader or investor would, and the reason for this is not hard to understand. If a CTA is successful what it means to me is that they have dedicated their lives to the craft.
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***DA: The first three are here in Part 1. Read Part 2 here

Warrington Asset Management expands beyond Morgan Stanley legacy
Ginger Szala
Warrington Asset Management, which was an independent but affiliated asset management group within Morgan Stanley (and predecessors) for the past 18 years, has finalized its separation from the bank and is now open as an alternative asset management advisor to a new set of prospective qualified clients. Recent regulatory changes stemming from the financial crisis led Warrington and Morgan to re-evaluate their long standing relationship and to allow Warrington to expand its business outside of the Morgan Stanley Wealth Management network.
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Lead Stories

Trend is your friend, say investors flocking to futures
Stephen Foley in New York, FT
The trend, they say, is your friend. Following the crowd in financial markets has been a successful investment strategy over the long run, since asset classes that start to go up, continue going up more than they go down, and vice versa.
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***DA: Certainly true these days.

Futures Funds Hitting the Fences
WealthManagement.com
Take a look at Chart 1. Does it make you think of anything? How about baseball? Recall the words of Yankee great and master of malaprops Yogi Berra: “When you come to a fork in the road, take it.” Looking at the fork here, Yogi could very well have been proffering advice to futures fund investors this year.
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***DA: It is more fun to publish a newsletter filled with good news. It has been a long few years for managed futures, with a clear breakout here.

Now Could Be the Time for Managed Futures Funds
Barron’s
Commodity trading advisors offer investors a chance to diversify their portfolios to include currencies, metals, grains, and interest-rate swaps—in addition to stock and bond indexes—that they can’t access in a plain-vanilla mutual fund. Their funds generally pay close attention to price trends in many markets to determine which futures instruments to trade and when to trade them. Because their long-term performance isn’t closely linked to stock or bond returns, these funds—known as managed futures funds, or sometimes just CTAs—may be a good hedge to a traditional portfolio.
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Need for better commodity regulation deepens
FT.com
I recognise that the recent decline in gas and oil prices may have somewhat diminished the level of public and policy attention around commodities regulation. But I do believe that working together to calibrate the right set of rules and regulations on commodity trading remains a fundamental task to ensure markets function properly and generate the right outcomes for producers, traders and consumers.
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Jon Corzine Considers Launching Hedge Fund; Plan would mark return to finance for embattled former MF Global CEO
By JULIE STEINBERG and ROB COPELAND, WSJ
Jon S. Corzine, the embattled former MF Global Holdings Ltd. chief executive and ex-chairman of Goldman Sachs Group Inc., has discussed plans to start his own hedge fund in recent months, according to people familiar with the matter.
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***DA: Chutzpah Fund, LLC. (That was the nicest comment I could think of).

Oil Bulls Are Losing Money Even as Prices Rise
Bloomberg Business
Want to capture the rally in oil futures? It’s harder than it looks. Oil futures are up 12 percent this year. Yet because of the quirky way the commodity trades, investors would actually have lost money if they bought the front-month contract on Dec. 31 and kept rolling that bet forward until now.
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***DA: Of course, the steep contango also means some fund investors did not take as big a hit last year when spot crude gapped down fifty bucks.

Armajaro Said to Shut Commodity Hedge Fund After Assets Shrunk
Bloomberg Business
The asset management arm of Armajaro Holdings has shut down a commodities fund after it became too small, said two people with knowledge of the matter.
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***DA: Veteran CTAs will tell you there is this no-man’s land between small and large funds where the costs are a major issue.

Just what constitutes net worth? NFA cites associate who included valueless items as client assets
By Andrew Saks-McLeod
Associate of introducing broker GFET, Harmik Iranossian allegedly estimated a prospective customer’s net worth at around $18,000 when, in reality, the prospective customer was insolvent
The US National Futures Association (NFA) has filed a complaint against Harmik Iranossian, who was an NFA Associate and registered associated person (AP) of Global Futures Exchange & Trading Co., lnc. (GFET), an introducing broker located in Tarzana California.
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***DA: I got a Richie Sambora guitar pick at a Bon Jovi concert back in 1986. Can I use it as collateral for a car loan?

Managed Futures/Managed Funds

Investors Allocated Heavily To Hedge Funds In March And Q1 2015
ValueWalk
Total hedge fund assets increased 0.35% in March of 2015 bringing the industry’s total assets under management to $3.101 trillion. Investors added an estimated $15.6 billion of new capital to the industry in March, while performance reduced AUM by an estimated $5.2 billion. Investor flows have historically been weak in March as early year allocations tend to arrive in February, however March 2015 inflows were well above the last five-year March average of $5.3 billion.
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A Liquid Alt Renaissance?
Financial Advisor
Whenever the investing seas get rough, investors seek shelter. And in 2008, that spelled opportunity for liquid alternative investments, which tend to be non-correlated with stocks and bonds. Yet as the waters have grown calmer in recent years, “liquid alts” have drifted from the spotlight.
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Family Office of Google’s Eric Schmidt Buys Lehman Estate’s Stake in D.E. Shaw; The family office, Hillspire LLC, bought a 20% stake in New York hedge fund
By JULIET CHUNG, WSJ
The family office of Google Inc.’s Eric Schmidt bought a 20% stake in New York hedge-fund firm D.E. Shaw Group from the estate of Lehman Brothers Holdings Inc., the parties said Thursday.
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Citadel managing director to join Alibaba family office – Bloomberg
Reuters
Oliver Weisberg has quit his role as a managing director of Citadel to help run a family office for Alibaba Group Holding Ltd executives, Bloomberg reported, citing two people with knowledge of the matter.
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Hedge Fund Managers Share Rich List Crown After Tricky Year for Brevan
by Laurence Fletcher , WSJ
Things are changing atop the ranks of the richest hedge fund managers.
Alan Howard, the founder of Brevan Howard Asset Management LLP, now has to share his crown at the top of the rankings of hedge fund managers in the 2015 Sunday Times Rich List for Britain after a tricky year for his firm.
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Hedge Funds Hawk Single-Bet Deals; Fees are lower, money is locked up longer in special co-investments
By ROB COPELAND, WSJ
It is the gold-plated equivalent of a late-night infomercial: a special deal for hedge-fund investors willing to act fast.
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***DA: I remember a time, back when I still took myself too seriously as a trader, I went into a Mercedes dealership. When I inquired about negotiating down from the sticker price on an MPV, the salesman said, “We don’t need more customers; we need more cars. And if you want one you are going to have to make up your mind quickly.” I still own the Toyota minivan I bought instead.

Big Banks Use Loophole to Avoid Ban
WSJ
Big banks are using a little-known loophole to avoid triggering a Securities and Exchange Commission ban on selling certain lucrative products to clients in the wake of enforcement actions. Deutsche Bank AG last week was able to avoid the threat of a ban on selling stakes in hedge funds by tucking specific language into an $800 million agreement it reached with a different regulator—the Commodity Futures Trading Commission—to resolve an interest-rate-rigging probe.
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How A CTA May Use Volatility To Set Protective Stops
Inside Futures
A non-high-tech measure of *historical volatility is given by the range of market prices over the course of a trading interval, this is usually a day or a week. The range of prices is defined as the difference between the high and the low for that given trading interval. If the range of the current day lies beyond the range of the previous day (Gap- up or down) the current days range must include the distance between the current days range and yesterday’s close. This is what is referred to as the “True Range”. The true range for a gap-down day is the difference between yesterday’s settlement price and today’s low. On the flip side, the true range for a gap-up day is the difference between today’s high and the previous day’s settlement price.
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Pensions & Institutions

Ontario Teachers CEO calls alternative investments ‘too expensive’
Pensions & Investments
Ontario Teachers’ Pension Plan, Toronto, is starting to step back from investing in alternative investments such as real estate and infrastructure because they are “too expensive,” said Ron Mock, president and CEO of the C$154.4 billion ($126.4 billion) pension fund, while speaking on a panel at the Milken Institute Global Conference in Beverly Hills, Calif., on Wednesday.
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Imagine: Brokers Who Work for Investors
By Barry Ritholtz Bloomberg
In 2011, the Securities and Exchange Commission published a study, mandated by the Dodd-Frank Act, which concluded that all financial advisers and stock brokers should be placed under “a uniform fiduciary standard.” Basically this meant that brokers and advisers would have an obligation to p
ut the interests of clients first and must disclose any conflicts of interest that might compromise that duty.
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Investors See Opportunities in Commodities; Commodities from crude oil to copper to sugar are luring investors, fueled by signs of a healing global economy and a pause in the dollar’s rally
By IRA IOSEBASHVILI
Investors are tiptoeing back into commodities from crude oil to copper to sugar, fueled by signs the global economy is healing and a pause in the U.S. dollar’s rally.
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How Pros Invest Billions
Bankrate.com
While technology hasn’t exactly leveled the playing field between regular-Joe investors and ultrahigh net worth and institutional investors, it has shown all the little people where the playing field is. Just look online and you’ll see that we may all be in the same ballpark, but we’re playing different games entirely.
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World’s Biggest Wealth Fund Seeks One Dark Pool to Cut Costs
by Jonas O Bergman, Saleha Mohsin, Bloomberg
Norway’s $890 billion wealth fund is taking the rare step of publicly criticizing the proliferation of dark pools, arguing the world’s biggest investors only need one such platform.
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A promising year for pension funds
World Finance
If 2014 was a big year for pension funds, 2015 looks set to be even bigger. As countries across the globe continue to recover from the financial crisis, funds across nations at all stages of development are capitalising on new opportunities and increased coverage. Emerging economies are improving their pension systems with wide-reaching reforms and game-changing liberalisation, while new regulations across a number of countries in the EU are helping pension fund managers to optimise and stabilise their long-term returns.
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How We Run Our Money: Alecta
IPE
Nordic investors are said to be at the forefront of innovation, pioneering new asset management and risk strategies and leading the way in ESG. Per Frennberg, CIO at Alecta, the largest occupational pension provider in Sweden, concedes that innovation has been “a strong discipline in the Nordic region”, partly due to its strong base of innovation-driven companies.
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Bernanke adds role as Pimco senior adviser to his jobs portfolio
Stephen Foley in New York, FT
Ben Bernanke is taking a role as senior adviser to Pimco, adding a second asset management firm to his portfolio of post-Federal Reserve paymasters.
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Regulation

FIA Global Issues Recommendations on Central Clearing Risks
FIA
FIA Global issued recommendations for assessing and managing risks that arise from central counterparty (CCP) clearing.
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Congress kicks can on CFTC
Confession time: Over the last three years I often have referred to the 113th and 114th Congress as either “do nothing” or “doing less than nothing.” This is wrong because each passing day of continued congressional nothingness clearly shows House and Senate leaders, then as now, busy as bees planning and implementing detailed action plans for inaction.
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Hedge fund push on swaps trades hits snag with CFTC’s Giancarlo
NorthJersey.com
Hedge-fund lobbying hasn’t persuaded a key U.S. regulator that the government should step in to curb Wall Street banks’ power over the $700 trillion swaps market.
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Volcker calls for U.S. financial regulation shakeup
BY DOUWE MIEDEMA, Reuters
The U.S. financial regulatory system is outdated and riddled with loopholes, former Federal Reserve Chairman Paul Volcker said on Monday as he offered an overhaul plan to make watchdogs more effective.
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CFTC chief wants possible clearinghouse cooperation if member defaults
MLex
The US Commodity Futures Trading Commission should consider whether clearinghouses ought to coordinate with each other if a member bank defaults, Chairman Timothy Massad said. http://jlne.ws/1OiWEOZ

Call to carve out unregulated investment advisers
FTAdviser.com
Advisers and others have called for radical solutions, including intermediaries willing to advise on unregulated investments being carved out from the rest of the sector for the purposes of the compensation scheme, to stem a rising tide of levies.
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