Observations / Statistics / Commentary
3rd Annual Managed Futures Pinnacle Awards, June 17th, Chicago
The Managed Futures Pinnacle Awards recognizes excellence exclusively in the managed futures space. Presented by CME Group and BarclayHedge, the Awards honor the top managers in the industry today, while providing networking opportunities for managers and investors. The awards are based on a set of quantitative data from BarclayHedge.
***DA: Since our last issue, the nominees for each category have been announced and, just this week, we learned that Frank Caliendo, arguably the best comic impressionist of our time, will be the featured entertainment. If you will be in Chicago for the MFA conference, or you will be in Chicago because you live/work here, check out the event.
CFTC’s O’Malia taking a hard look at HFT
Michael Lewis’ book “Flash Boys” stirred up debate about high frequency trading like no other. Regulators, such as the Commodity Futures Trading Commission (CFTC) are taking a more in-depth look at the trading method to determine if there might be problems with HFT in the futures space as well.
CFTC Commissioner Scott O’Malia, speaking to John Lothian News for its market structure series, said that HFT has been on the agency’s radar screen for some time, and has created a sub-committee to bring experts on both sides of the debate.
Emerging Manager Forum Update – New App
The new EMERGING MANAGER FORUM APP will go live on Monday. To access it you go to the APP store and do a search for EMERGING MANAGER FORUM. To download the full APP which contains the registration list and permits you to contact other registrants to set up meetings you must register for the FORUM. Once you register you will receive a password.
We are pleased to announce that we will be co-hosting events with Swiss Financial Services in Zurich on June 17 and with Profit and Loss Magazine on June 18. The 2 additional events along with EMERGING MANAGER FORUM are designed to create networking opportunities for managers, asset allocators and service providers to the industry. For full information go to EMERGINGMANAGERFORUM.COM or call Frank Pusateri +518-656-9348 or Bucky Isaacson +650-851-8507.
Hedge funds post negative results
Hedge funds posted their second consecutive month of negative returns in April with the Eurekahedge Hedge Fund Index down 0.15% as global markets continued to falter amid a sluggish start to the year.
Winton gains from cash equities
Emma Cusworth – Financial News
A significant change in strategy should signal alarm bells for many hedge fund investors. In the case of Winton Capital Management, however, its increasing focus on cash equities appears to be paying dividends.
**JK – Very interesting piece on what asset classes are driving Winton’s returns these days.
Zamansky LLC Investigates Campbell Strategic Allocation Fund, Campbell Global Trend Fund And Other Managed Futures Funds
Law Firm Newswire
According to investment fraud attorney Jacob Zamansky, as managed futures funds, the Campbell Funds have substantial risks associated with leverage and the speculation involved in their trading strategy. These funds are suitable or appropriate only for investors willing to speculate or bear substantial risk of loss, Zamansky states. Any investor who is not sure whether this investment is appropriate for you, should have their situation reviewed by a professional, Zamansky believes.
***DA: Not sure how I feel about this one. The cynic in me says, “a lawyer heard the word ‘fees’ and now wants his piece.” The rise of these products is related to the desire for all investors to access an asset class that used to be reserved for only sophisticated and well-heeled investors. But not everyone understands the risks and fee structures.
Commodity funds down in 1st qtr, even as energy markets rally
Two-thirds of commodity hedge funds lost money in the first quarter, extending last year’s dismal run, possibly because they bet against higher crop and energy prices in a rallying market, data from futures broker Newedge and banker HSBC showed on Wednesday.
Ex-MF Global Customers Take Aim at Defense Costs
Former MF Global customers are urging a judge to exercise caution in allowing ex-officials of the failed brokerage to continue tapping an insurance policy to pay for the defense of lawsuits stemming from the firm’s collapse. The former MF Global officials won’t back down “until the court turns off the spigot and the litigation finally has serious financial consequences to them,” a group of customers backing a class-action lawsuit against former MF Global leaders wrote in a letter filed Monday in U.S. Bankruptcy Court in Manhattan.
***DA: Don’t hold your breath.
Managed Futures / Managed Funds
Steben & Company Launches a Managed Futures Mutual Fund
Steben & Company, a leading provider of alternative investments, announced that it has launched the Steben Managed Futures Strategy Fund, an actively managed, multi-advisor mutual fund.
You Don’t Need to be Rich to Invest in Alternatives
Alternative investments gained a lot of popularity among investors as investments results were reported from some of the major endowment investors across America. When the average investor hears terminology including hedge funds, private equity and derivatives, the most common misconception is that alternative investment are really meant only for the clients who have an extremely high net worth.
***DA: But it helps to be rich.
What’s an Alternative Investment, Anyway?
With a tough and volatile decade for equity returns, and a somewhat bleak current yield on low-risk bonds (at least by historical standards!), investors have been increasingly looking to “alternatives” to traditional stocks and bonds to round out their portfolios, including asset classes like real estate and commodities.
***DA: Good question. As alts enter the mainstream, theoretically, they should cease to be called “alternative.”
The Rich List: The Highest-Earning Hedge Fund Managers of the Past Year
Institutional Investor’s Alpha
It took more than simply riding the stock market for hedge fund managers to earn an outsize haul in 2013. A number of the managers who excelled last year — and therefore top Alpha’s 13th annual Rich List ranking of the hedge fund industry’s 25 highest earners — shrewdly found opportunities in sectors and markets that were not widely targeted by the momentum set.
Age over size affects relative hedge fund performance
eVestment – Risk.net
Age appears to play a greater factor in relative performance than size. Young funds posted the highest cumulative returns since 2003 and during the past five years have also outperformed middle-aged and tenured funds.
Hedge Fund Returns Are Falling Because Hedge Fund Returns Used To Be Just Great
Tim Worstall – Forbes
Dan McCrum over at FT Alphaville has a look at why the top hedge fund managers are making so much darn money. I don’t disagree with anything he says I just want to pick up on a point and expand it. For we can explain some of what has been happening just with some pure Adam Smith from a couple of centuries ago. what is being said here about new and small hedge funds also rather applies to the entire industry:
***DA: Everything gets arbitraged out eventually.
O’Connor produces another hedge fund, Satori Investment Partners
Lynne Marek – Crain’s Chicago Business
The O’Connor asset management business of UBS AG in Chicago has been birthing hedge funds and trading firms for more than a decade, and it’s about to deliver another one.
What Hedge Funds Talk About When They Talk About Money
Behind the dancing fountains of the Bellagio Hotel, hedge fund titans mingled with wealth managers at the Hyde nightclub on Tuesday night.
***DA: My guess is it has something to do with money.
Pensions & Institutions
CME Group fines Ontario Teachers’ Pension Plan for hog trades
The Ontario Teachers’ Pension Plan Board, which manages investments for Canada’s largest single-profession pension plan, violated speculative position limits in CME Group Inc’s lean hog futures market, the exchange operator said.
**JK – New headline: Pension fund gets indigestion from hogs.
Active management industry in bafflingly good health
John Authers – FT.com
Here are two versions of the future of investment management, both overheard last week. The first came from a fellow journalist. He was exasperated: “What I want to know is, how do active managers even exist? Everyone’s known for years that they don’t earn their money. And yet there are even more of them.”
***DA: Maybe it’s that most people think they are getting the special deal that is subsidized by the ones getting a raw deal. I said the same thing about car dealers.
Fund managers face passive-aggressive backlash
Pauline Skypala – FT.com
It’s official: paying active managers to pick stocks is a waste of money. Who says so? The UK government, which is consulting on whether the GBP178bn Local Government Pension Scheme should switch from active to passive management for listed assets.
Top funds adjust alternatives allocation
Local Government Chronicle
The higher returns attributable to active asset management, naysayers argue, are eroded by the higher fees pension schemes must pay to access them. However, those in favour of active management argue that it delivers returns above the fees it demands. The government revealed earlier this month in its consultation on the future of the local government pension scheme that it believes in the value of both active and passive asset management.
Pace of UK pension funds exit from equities slows as sentiment improves
K pension schemes have reduced their equity exposure at the slowest rate since the financial crisis, increasing their allocations to alternative assets with the average bond allocation remaining constant over the past year.
Secret Pension Fund Deals
As managers of public pension funds realized that what they had would not fund what they needed, many shifted money from plain vanilla bonds and mutual funds into riskier “alternative investments,” like hedge funds that promised high return and required strict confidentiality. But as Pando Daily and others have shown, that secrecy can hide high fees, low returns, excess risk and the identity of politically connected dealmakers.
Hedge Fund Asks S.E.C. To Delay Disclosures
MATTHEW GOLDSTEIN – NYTimes.com
Mr. Einhorn’s request to the S.E.C. for confidential treatment illustrates the zealous approach some managers in the $2.7 trillion hedge fund industry take when it comes to keeping their trading positions out of the public eye. But it also reflects the risk that can come with being a money manager like Mr. Einhorn, who has cultivated press coverage over the years when it suits his interests.
CFTC Expands Portal Capabilities to Make Market Participant Electronic Submissions Easier, more Efficient
Beginning today, market participants can submit event-specific reports more easily and securely because of new enhancements to the U.S. Commodity Futures Trading Commission (CFTC) Portal. The new features also improve the CFTC’s ability to process submissions.
Regulators See Growing Financial Risks Outside Traditional Banks
U.S. regulators have spent the past six years forcing banks out of businesses seen as risky. Now, they are beginning to worry that they have pushed some financial activity into the shadows and outside their legal reach.
***DA: Heads up – they are gunning for your fund, in the name of systemic protection.
U.S. risk council warns about asset managers, mortgage servicers
The U.S. financial risk council on Wednesday raised red flags about new, potentially risky practices by asset managers and nonbank mortgage servicers, which they said are not regulated as carefully as banks.
***DA: Told ya so.
FCA says most asset managers not clear on fees
Mark Cobley – Financial News
Most asset management firms in the UK are failing to provide retail investors with clear “all-in” figures on fund charges, a Financial Conduct Authority review has suggested – and the industry’s trade body has called on its members to overhaul their pricing as a result.