Observations/Commentary

The Taming of the Skew
Campbell & Company
This paper examines the sources of skewness in trend following portfolio returns. Investors are often concerned about the negative skewness of equity returns, especially when equity markets fall, and look for strategies like trend following to improve risk-adjusted returns. Campbell concludes that skewness is simply an outcome of varying risk through time, and argues that the ultimate decision of whether or not to vary risk over time depends on the investor’s objective: to diversify or to complement other investments.
go.campbell.com/TamingoftheSkew2016

**JK: Who says white paper titles are dull?

The hedge fund industry needs a makeover
FT.com
David Rubenstein, co-founder of Carlyle, the US asset manager, kicked off a lavish hedge fund conference in Las Vegas last month with a rallying cry: the industry has been under attack, and hedge fund managers must defend their occupation. “Be proud, not embarrassed,” he said.
That may be a tall order.
bit.ly/1XXv2ZF

**JK: So the hedge fund space is getting the memo it has a perception problem just now?

Lead Stories

Preqin: CTAs Gaining Assets as Investors Increase Allocations
FINalternatives
Hedge fund investors are increasingly turning to CTAs over the past several quarters, according to a new special report from industry data provider Preqin.
The number of institutional investors actively investing in CTAs reached a record 1,067 in 2015, up from 1,017 in 2014, according to Preqin.
bit.ly/1XXu5jT

**JK: Good news for the CTA space.

Barclay Hedge Fund Index Gains 0.78% in May; Positive Economic News Push Equities Higher
BarclayHedge
Hedge funds gained 0.78% in May, its third consecutive positive month, according to the Barclay Hedge Fund Index compiled by BarclayHedge. Year to date, the Index is up 0.85%.
bit.ly/1XXsdrh

Managed Futures To Lead Hedge Funds?
ValueWalk
Managed futures CTAs are posting gains in June as equity long / short program profitability sags, a recent Credit Suisse report notes. While CTAs, measured by the Credit Suisse Hedge Fund Index, are down -1.7% year to date, surrendering significant gains early in the year as predicted in ValueWalk, the Natixis ASG Managed Futures mutual fund is up 4.24% in the A shares year to date.
bit.ly/1XXrZR3

Brexit shadow looms over Rathbones’ multi asset portfolios
In the case of David Coombs, the seasoned lead manager at Rathbone Multi-Asset Portfolios, he made changes to his investment strategy in June last year.
bit.ly/1XXtSNC

**JK: I’ll bet anyone you can not go to London without hearing or talking about Brexit in the first 15 minutes you are there.

Managed Futures/Managed Funds

Drawdown: How Long Will It Last For Managed Futures?
ValueWalk
Managed Futures is officially in the red for the first time in 2016, seeing a -8.83% drawdown since mid-February. We could sit here and tell Managed Futures investors to blast Wilson Phillips “Hold On,” on full volume (we already did that), but it only provides temporary relief. What you may need more than a song, is some hard numbers. Or, as Anton Ego put it: “some fresh, clear, well-seasoned perspective”
bit.ly/1XXseLP

An Alternative View: Why It’s The Asset Class Of The Future – International Adviser
Ophir Gertner, founder of invest.com
In today’s era of low interest rates, stock market fluctuation, and economic uncertainty, most people are faced with either low returns or high risk on their investments. For this reason, interest in alternatives – with their ability to diversify investments, reduce risk and provide uncorrelated returns – has grown significantly in recent years, according to Ophir Gertner, founder of invest.com.
bit.ly/1XXtdvG

Commodity Funds Outperform for First Time in Years
Think Advisor
For the first time in years, commodities are doing something they haven’t done in a while: They’re outperforming major asset classes like stocks, bonds and real estate.
bit.ly/1XXszhH

Managed Futures: Get A boost From Hillary Clinton & Donald Trump?
ValueWalk
There’s no doubt this presidential cycle has been… interesting. The standard pedigree no longer exists, the candidates of the two major parties have the worst net popularity rating (strongly favor minus strongly unfavored) than any other candidate dating back to the 1980’s, and the anticipation of what’s going to happen next is captivating the world.
bit.ly/1XXrRRG

Machines Beat Humans in Hedge Fund Quest to Time Market Bottom
Bloomberg
In a historically bad year for hedge funds, one of their close relatives is thriving. Computer-driven quants, which pick shares based on factors like momentum and size, have been the only hedge fund category to buy additional stock in 2016, data from Credit Suisse Group AG show. The move paid off as the S&P 500 Index crept within striking distance of all-time highs, while hedge fund managers were busy unloading shares.
bloom.bg/1XXslqN

The Big Question: How to select an FCM?
The Books
With the shrinking number of FCMs, it might seem a CTA has little choice, or in some cases, too many. Either way, you need to know the questions to ask, and if you’re not happy with the answers, move on.
bit.ly/1Ut7ecZ

BlackRock Makes Case for Active Management
WSJ
BlackRock, the money manager with the largest exchange-traded fund business in the world, kicked off its investor day with a focus on a different part of its business: active management.
on.wsj.com/1XXuJOu

Lead Stories

Federal Court Orders Florida Resident Rico Omar Cox To Pay Over $940,000
CFTC
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge William J. Zloch of the U.S. District Court for the Southern District of Florida (Fort Lauderdale) entered an Order of Default Final Judgment (Order) against Defendant Rico Omar Cox (a.k.a. Omar Negron) (Cox) of Dania Beach, Florida, requiring restitution of $381,000 and imposing a $560,000 civil monetary penalty for defrauding his clients in connection with commodity futures trading.
bit.ly/1XXuYJj

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