Observations / Statistics / Commentary
By Doug Ashburn
This issue of JLN Managed Futures begins with an apology. We should have published yesterday, but have been busily recovering from the conference circuit which, by the way, included the CTA Expo New York. The event was held for the first time at the New York Stock Exchange’s 7th floor conference center, with its oak panels, retro lighting and delightful artwork. The conference panels featured some great panels and, as always, terrific networking opportunities. For more on the CTA Expo and to view the rest of this year’s lineup, click here:http://jlne.ws/zc1HxN
Additionally, I spent the day apologizing for bringing Chicago’s weather with me to New York. It rained from the moment I arrived to the moment I left. The following day was 75 degrees and sunny. Chicago was and still remains cool and damp.
John Henry and the Making of a Red Sox Baseball Dynasty
It’s Opening Day at Fenway Park, more than an hour before game time, and the seats are already jammed. No surprise here. Boston Red Sox fans feed on emotion. Today’s capacity crowd skipped work and school for the chance to mainline the best feeling of all: to celebrate as their team collects its championship rings for winning last fall’s World Series.
***DA: Tag line: John Henry runs the Red Sox like a commodities trading desk. How does he do it?
The Obligatory John Henry/Commodities Article
Attain Capital Management
If you haven’t heard yet… Billionaire Boston Red Sox owner John Henry got his start in the commodities industry, and more specifically – the niche hedge fund segment known as managed futures. He’s never been shy about a magazine cover, or cameo in MoneyBall, and despite his being out of the ‘commodities’ business for a while now, he’s on a recent cover of Bloomberg Business once again linking the Red Sox with commodities.
***DA: Includes the obligatory baseball cliches.
Hedge Funds Drive to Another Record; Assets Climbed to $2.7 Trillion in First Quarter
By Rob Copeland, WSJ
Even as performance flickers at some top managers, investors still are taking a shine to hedge funds.During the first quarter of 2014, investors continued to move increasing amounts of money into hedge funds, sending industrywide assets under management to a record, industry tracker HFR Inc. said.
Futures giant begins trading at its new London exchange
The owner of the world’s largest futures market, which has been caught up in the crackdown on high-frequency trading, has launched a new exchange in London.
Misery continues for trend-following hedge funds
Trend-following hedge funds have suffered further outflows amid weak investment performance, raising questions about their survival. Commodity trading advisers, hedge funds that tend to follow trends in markets using computers to place bets, suffered their 10th consecutive month of net outflows in March, according to Eurekahedge, the data provider.
***DA: They say misery loves company, but I tend to prefer to be alone.
Commodities: To Buy or Not to Buy?
Wall Street Journal
Commodity prices are on the rise, as gold, corn and other basic materials climb back from steep declines—and outpace U.S. stocks. The rebound may stir hopes that a longer-term boom has resumed after three rough years for natural resources, and a measured bet could pay off. But for ordinary investors, commodities often are a raw deal. They should take a hard look before loading up.
***DA: Commodity investing is about protecting against inflation or monetary debasement.
ADM liquidates its fund of CTAs
CTA Intelligence (subscription required)
ADM Investor Services (ADMIS) is liquidating its portfolio of accounts managed by CTAs and returning money to investors, CTA Intelligence sister title HFMWeek reports.
Alternative Mutual Funds Draw Concerns from Financial Advisers, Regulators
Alternative mutual funds are growing in popularity, but some financial advisers say they are not yet sold on these complex and evolving products. Investors generally have been smitten with the funds, which may use strategies common to hedge funds or combine several different investment strategies. Many use them to improve their portfolios’ performance or provide returns not correlated to stocks or bonds.
Corzine, Other MF Global Defendants Ask for More Insurance Money
Wall Street Journal
Attorneys for Jon Corzine and other former MF Global officials have an “urgent need” to tap the company’s insurance money to continuing defending themselves against a deluge of litigation tied to the brokerage’s collapse.
Managed Futures / Managed Funds
Sell in May, and Look Managed Futures Way?
Attain Capital Management
Financial Blogger Zerohedge dug into this theme a little more with a recent post, highlighting the S&P 500’s average returns by month since 1950, and the data definitely supports the theme, with the May through October returns visibly less than Nov. through April. But is it really that easy?
Alternative Mutual Funds May Disappoint
Rob Copeland – MoneyBeat – WSJ
So-called alternative mutual funds that aim to replicate popular hedge-fund strategies for retail investors have never been hotter. But a new report this week suggests that performance in some of the more popular vehicles could be disappointing.
***DA: Anything that is compared to last year’s 31 percent stock market return will appear disappointing. Anything that requires layers of manpower will have fees attached. Buying blindly is a fool’s errand.
Commodities favoured in rotation from stocks and bonds
Neil Hume, Commodities Editor – FT.com
After several years of poor performance investors are warming to commodities. Helped by the return of volatility, strong returns and declining correlations with other asset classes, money has started to trickle back into the sector.
Global Macro Kings, Tudor, Citrone And Fortress Fall In 2014
by Tabinda Hussain – Value Walk
Global macro is one of the two hedge fund strategies that had aggregate losses in Q1, nearly $5 billion moved out of these hedge funds.
One manager’s decision to convert a CIT into a mutual fund
In June 2008, SKBA Capital Management LLC launched a daily valued collective investment trust in its flagship ValuePlus equity strategy, which focuses on dividend-paying companies. The initial capital for the fund came from employee contributions.
Pensions & Institutions
Pension funds weary of interest rates high-wire act
Cecile Sourbes – Risk.net
Rising rates would help reduce pension fund deficits, but would also hurt the sector’s hedges. That could be managed by trimming hedge ratios, but funds are scared of acting too soon.
***DA: It’s hard to be right about direction and timing as well. Ask PIMCO.
Defusing a Demographic Time Bomb: A Pension Fund Case Study
The unfunded character of pension plans throughout the developed world has been a recurring concern for us at AllAboutAlpha. A year and a half ago Shane Brett predicted here that the “realization by both governments and their state employees that the money to fund their retirements does not exist, will be one of the defining themes of the next 30 years.” Nothing that has happened since then has weakened the cogency of Brett’s assertion.
Pensions Cool on Smart-Beta ETFs
In the exchange traded fund space, so-called smart-beta indexing methodologies are turning heads. Pension funds, though, are still sticking to what they know.
GPIF Shakes Up Committee With Three Abe Panel Members
Anna Kitanaka and Shigeki Nozawa – Bloomberg
Japan’s government pension fund overhauled its investment committee, adding three members of a state panel that urged it to cut bonds, as the balance of power shifts at the world’s biggest manager of retirement savings.
Rising Interest Rates Will Hurt These Hedge Funds
Talk to Andrew Silton for five minutes about hedge funds and you may want to sell every one you have. The retired chief investment advisor of North Carolina’s pension plan thinks many funds will be in for a world of hurt once interest rates rise. And with the Federal Reserve winding down its bond-buying program, he thinks that rate spike is coming soon. “Hedge strategies that work 90% of the time could have serious problems,” he says.
Sirota: Wall Street’s secret swindle
In the national debate over what to do about public pension shortfalls, here’s something you may not know: The texts of the agreements signed between those pension funds and financial firms are almost always secret. Yes, that’s right. Although they are public pensions that taxpayers contribute to and that public officials oversee, the exact terms of the financial deals being engineered in the public’s name and with public money are typically not available to you, the taxpayer
***DA: It’s not that big a secret. Most just choose not to look.
Chicago Teachers Union: New taxes to fix pensions–but not higher property taxes
The Chicago Teachers Union is rolling out a plan they say will help solve the teachers pension crisis. CTU leaders say their proposals would raise much-needed money for the cash-strapped retirement fund that covers the city’s educators. The fund is just under 50 percent funded.
***Spoiler alert: financial transaction taxes, TIF-raiding and a tax on commuters. Dead on arrival.
Pilot infrastructure program targets public pension funds, government subsidies
An infrastructure pilot project just getting underway seeks 10 public pension funds as initial investors in a program whose investment-related fees would be subsidized by federal and state agencies.
***DA: And who funds these federal and state agencies?
The SEC could find new uses for an old law
It is probably too late to change the number of individuals charged in relation to the financial crisis, even if US regulators reconsider their treatment of offending corporations, but there may be a route to more aggressive enforcement by dusting off a little used part of a 1934 statute. Jordan Thomas, a former SEC Enforcement Director and chairman of the whistleblower representation practice at Labaton Sucharow, outlines a way the Commission could go after malign managers in the future.
Hedge fund industry wades into systemic risk debate
Sarah Krouse – Financial News
Representatives from the hedge funds industry have joined the debate over whether asset managers could pose a systemic risk if they fail, arguing that regulators are taking the wrong approach to evaluating potential threats.
Is SEC Crackdown On Fund Fee Disclosure Coming? by Mark Melin – Value Walk The main headlines from Mary Jo White’s Congressional testimony yesterday centered around her saying the markets were not “rigged,” yet several little known sentences could potentially lead to a significant policy shift at the agency regarding “rigging” investment disclosure, according to regulatory sources and recent on the record statements. A new, aggressive SEC policy could impact alternative investment mutual funds, but it is unclear if this will impact “Dark Pools” used in high frequency trading, including the payments from exchanges to brokerage firms and the general lack of transparency.
***DA: Second section of the article looks at the difference between CFTC and SEC rules on fee disclosure.