Observations/Commentary

Fund Injection: Peter Borish Looks to Ramp up Managed Funds Space
JohnLothianNews.com

Peter Borish has seen the ups and downs in the fund space over his career. Now as chief strategist at Quad Advisors, which is aimed at providing key infrastructure services to the managed funds space.

Borish spoke with John Lothian, publisher of John Lothian News, at the Futures Industry Association’s EXPO in Chicago in November about the new venture and what Quad Advisors brings to the managed funds space.

“We look for people with $20 million to $50 million under management,” he said. “But in a post-Dodd-Frank world, they need a lot of help to grow. We become partners, sharing in the revenue to help them grow.”

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Emerging Manager Forum Miami: Last Call
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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***DA: I just heard this morning that 90 of this year’s registrants thus far are listed as capital sources. Sounds like the place to be. Oh yeah; and the forecast says partly cloudy and 80 degrees.

Managed futures outperform in Q3
Futures
Alternative investment manager Campbell & Company made the case for allocations to managed futures in a paper titled: “A Case Study for Managed Futures.” In it Campbell points out the strong performance of managed futures in the third quarter and notes that Q3 performance, “reveals some of the most compelling attributes of managed futures.”
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***DA: The benefits of non-correlation, asset class and two-way directional exposure. To read the entire paper on the Campbell site, click here: http://jlne.ws/1HRLv7m

Barclay CTA index down 0.49% in October
Hedgeweek
Managed futures lost 0.49% in October according to the Barclay CTA Index compiled by BarclayHedge. The Index is now up 3.88% for the year.
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***DA: I can’t wait to see the next update. All who jumped on the crude trend last month got an early Christmas present at the end of November.

Lead Stories

Liquid Lowdown
Financial Advisor
The tsunami of liquid alternative investment funds introduced in the aftermath of the financial crisis continues to surge along with investor interest, and neither is expected to retreat in the foreseeable future. According to Morningstar, the number of distinct alternative mutual funds more than doubled from year-end 2008 to September 2014. The universe now includes 463 funds across 14 strategies. Total assets over this period ballooned from $38 billion to $161 billion.
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***DA: Now all they need to do is make money.

Redemptions Outpace Allocations for 2nd Consecutive Month
Value Walk
Total hedge funds assets were virtually unchanged in October, decreasing 0.0002%, to $3.020 trillion, according to new data from eVestment . Performance gains among many large funds accounted for an asset increase, while redemptions outpaced new allocations for an outflow of $2.9 billion during the month.
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***DA: The Calpers put?

Wealth manager research reveals true cost of fund manager exits
Julia Rampen – Investment Week
The departure of star managers may have hidden costs for investors “stampeding” for the exit, a wealth manager has warned.
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FIA lobbies against Basel treatment of segregated margin
Jon Watkins – The Trade
The Futures Industry Association (FIA) has written to the Basel Committee on Banking Supervision asking them to reconsider the inclusion of segregated margin in its leverage ratio calculations.
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***DA: First the residual interest rule, and now this.

Brevan Howard to close commodity fund due to poor performance
By Chiara Albanese, Giles Turner and Laurence Fletcher – WSJ
Brevan Howard Asset Management plans to close its commodity hedge fund following recent poor performance, according to two people familiar with the matter.
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Preqin Reveals Hedge Fund Success Traits Over Past Year
Mark Melin – Value Walk
As the U.S. Federal Reserve prepares to wind down its quantitative easing, the November Hedge Fund Spotlight report from Preqin notes that “many are predicting further turbulent times ahead for financial markets across the globe.” With this in mind, they consider trends in hedge fund strategies that have worked over the past year.
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Managed Futures/Managed Funds

Hedge Funds Seek to Tie Up Money for Longer
Rob Copeland – WSJ
Hedge-fund managers are increasingly persuading investors to lock up their money for longer—in many cases more than double the typical one-year period—and dangling lower fees to close the deal.
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***DA: Looks to be a fair tradeoff.

Nimbleness and focus provide an edge for family offices
David Bain – Financial Times
Interior design is not a skill usually required to run a family office. But Benedikt von Michel was at one stage working with four interior designers involved in an estate that the family he was employed by had just bought in the Loire Valley in France.
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***DA: A full-service manager.

Consultants “a one-way challenge” to funds of hedge funds
Risk.net
As funds of hedge funds’ assets have plunged, few want to criticise their rivals in investment consultancy. Other market players find much to criticise At the time of the financial crisis, funds of hedge funds’ (FoHF) assets under management fell from around $800 billion in 2007 to $590 billion in 2008. It has barely recovered since
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You are not experienced
Dan McCrum – Financial Times
Statistically speaking. Pieria has some stats from Citywire on the tenure of fund managers in its database of 17,000 funds, judged to be one of the important factors that financial advisors say they consider when choosing funds for their clients.
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Narrow asset classes constraining managers
Risk.net
Liberating an investment strategy from asset class constraints can position a portfolio to reap the rewards from volatile and illiquid markets
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In Defense Of Diversification
Michael Gayed – Investing.com
Stocks are not hitting new highs. Only a particular index, the S&P 500, has that distinction. When reviewing sentiment surveys this weekend, I am struck by how extreme optimism has been relative to history when in fact the average stock is flat to down this year based purely on breadth. Small-caps have not fared well in a way that suggests the optimism is justified. Neither have emerging markets nor Europe. Not a single advisor I’ve spoken with has said their clients want less S&P 500, rather they want more.
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Pensions & Institutions

Marsh’s Mercer to Add SCM, Brace Alternative Investments
Zacks.com
To ramp up alternative investment capabilities, Mercer, a wholly owned subsidiary of Marsh & McLennan Companies, Inc., recently inked a deal to buy SCM Strategic Capital Management AG. The deal, pending regulatory approvals, is expected to see light in the first quarter of 2015. Shares gained 0.5% in the last trading to close at $56.12 at the day’s close.
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Asian pensions eye riskier and alternative assets
The Journal of Investments & Pensions
According to a State Street Corporation research paper, more than half (57%) of surveyed pension funds in the region intend to deepen their exposure to real estate investments. Meanwhile, 45% signalled their intention to invest more in private equity, and 41% into infrastructure. When it came to hedge fund investing, 57% of pensions in Asia-Pacific said they were looking to increase their allocation to single managers over the next three years, while 32% said they would seek to do so for fund-of-hedge fund investments.
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***DA: Risk? What risk?

Poor performance catching up with active stock fund managers
Ross Kerber – Reuters
With bad bets on financial shares, missed opportunities in technology stocks and too much cash on the sidelines, roughly 85 percent of active large-cap stock funds have lagged their benchmark indexes through Nov. 25 this year, according to an analysis by Lipper, a Thomson Reuters research unit.
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***DA: Even professional market-timers have a hard time getting it right.

Pimco’s October Outflows Set a Record in Europe
Sarah Krouse – MoneyBeat – WSJ
Investors pulled EUR11.2 billion ($14 billion) from Pacific Investment Management Co.’s European funds in September and October on the heels of Bill Gross’s sudden departure, according to new figures from investment research firm Morningstar.
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Pension Funds Lambast Private- Equity Firms for Large Fees
Simon Clark – WSJ
Pension fund managers from the Netherlands to Canada, searching for new ways to invest, lambasted private-equity executives at a conference in Paris this week for charging excessive fees.
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IPE Awards: Pension funds’ awareness of ‘implementation leakage’ rising
IPE
European pension funds have moved away from the belief that asset allocation drives investment returns after having grasped the true impact of internal governance, research has showed.
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Are Pension Funds Heading for Trouble?
Institutional Investor
Institutional investors are filling the capital markets void traditional lenders are creating as they face tighter regulations.
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Regulation

CME Group defends market surveillance after CFTC review
Tom Polansek – Reuters
CME Group Inc on Tuesday defended its record of pursuing market manipulation, a day after U.S. regulators said the world’s largest futures exchange operator should put more work into identifying an illegal trading practice known as “spoofing.”
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FIA Issues Fourth Version Of Guide to Customer Fund Protections
FIA issued an updated version of its guide to the rules and regulations relating to customer fund protections in the U.S.
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CFTC Staff Issues No Action Relief for Family Offices from Commodity Trading Advisor Registration
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CFTC warns EU rules may force tighter US derivatives regulation
Philip Stafford – Financial Times
The US may be forced into tougher regulation on benchmarks as planned stringent European rules may shut out the region’s banks and asset managers from US markets, the head of the US derivatives regulator has warned.
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