Observations / Statistics / Commentary
Managed Futures has been Bloomberged
John Lothian News
The big story in the managed futures world last week – the only story, really – was the publication of an article by Bloomberg’s David Evans skewering the asset class and the often high fees assessed to investors. While we invite readers to check out the story and make up their own minds regarding the accuracy and validity of the story HERE, we also invite everyone to read the three installments of John Lothian’s rebuttal, “Managed Futures Bloomberged:”
By the way, we started getting “the story behind the story” even before the article was published, when a service provider called us up and asked if we had heard of this reporter, because he seemed a tad aggressive. We have since heard stories about an interviewee who asked that Evans be escorted from the premises, and another interviewee who was badgered with leading questions such as “don’t you think these fees are exorbitantly high?” In other words, we foresee a lucrative career in cable television.
Change is in the Air at John Lothian News
John Lothian News (“JLN”) is pleased to announce the launch of an eponymous comprehensive news website, johnlothiannews.com. The new site will combine content from all previous JLN news sites and MarketsWiki.tv into a single dynamic multimedia news portal, displaying all JLN original content, newsletters, commentaries, stories, videos and interviews.
JLN is also pleased to announce the launch of JLN Financials, a new newsletter that will replace JLN Interest Rates, JLN FX and parts of JLN Metals. JLN Financials coverage will include interest rates, FX, indices and gold.
Additionally, John Lothian News is pleased to announce the promotion of Sarah Rudolph to the position of managing editor. Also, Doug Ashburn will take on the title of vice president of John Lothian News in addition to his role as editor-at-large.
The johnlothiannews.com site was designed by Ryan Lothian, the chief marketing officer of John J. Lothian & Company, Inc. The new site replaces our old sites, johnlothiannewsletter.com, jlnoptions.com, jlnfx.com, jlnmanagedfutures.com, jlnmetals.com, jlnevironmental.com, jlninterestrates.com and marketswiki.tv.
Each of the JLN newsletters will have its own landing page in the new site, with its current unique domain pointing to a unique subject related page. Additionally, we are adding unique subject related landing pages for Technology/HFT and Regulation.
Quote of the Day
“The research shows that it is impossible to pick people who can beat the market.”
– Nobel Prize recipient Eugene Fama, from the Bloomberg article “Fama’s Nobel Work Shows Active Managers Fated to Lose”
CTA trend followers suffer in market dominated by intervention
As correlations return to normal, many CTAs hope for better performance, citing market intervention by central banks as effectively stopping markets from trending and creating short, sharp reversals. The last two-and-a-half years have been brutal for trend followers. Performance of the CTA industry in particular has fallen dramatically since 2008.
Fama’s Nobel Work Shows Active Managers Fated to Lose
Charles Stein – Bloomberg
The work that earned Eugene Fama the Nobel Prize in economics provided the intellectual foundation for index-tracking funds, which have upended stock picking as investors abandon active money managers.
FX Concepts Closing Asset-Management Business
Wall Street Journal
The developments at FX Concepts underscore the difficulties traders are having in currency, futures and commodities markets, even as stocks enjoy another boffo year. Currency funds are down 1.68% this year, after losing 1.1% last year and dropping 3.2% in 2011, according to data-tracker HFR. Assets in hedge-fund strategies dedicated to currency trading have fallen to $21.6 billion, down nearly 50% from a peak of $40.4 billion in 2007, HFR says.
Hedge Funds Rise In September, Q3; Should Beat 2012 Returns—But Still Lag S&P
September was a relatively positive month for hedge funds, according to new data from eVestment: On average, they rose 1.7% last month, ending up 2.4% for the third quarter. On an annualized basis, the report notes, this puts the industry on pace to return 7.7% this year, inching ahead of 2012’s 7.2% rise.
Here Is Perhaps the Single Biggest Ripoff on Wall Street
Do you or a loved one have an investment account—perhaps for retirement? Is any of that money invested in a “managed futures” fund? If so, stop reading now and pull that money out immediately. It is being stolen from you as we speak.
**DA: This Gawker article took the Bloomberg managed futures article cherry-picked that which had already been cherry-picked. One truth here is that one must conduct exhausting due diligence on not only the manager, but also the broker, brokerage firm, and any other layers of fees involved.
Managed Futures / Managed Funds
Hedge funds positive in Q3, says Altin
Hedge funds ended the quarter in positive territory although returns differed significantly by strategy, according to Swiss alternative investment company Altin.
**DA: Managed futures among the sectors with a down quarter. The hits keep on comin’.
Altegris Clearing Solutions Adds BofA Merrill Lynch To Roster Of Clearing Relationships
Altegris Clearing Solutions, LLC, part of the Altegris group of companies has signed an agreement with BofA Merrill Lynch’s Futures & Options and OTC Clearing unit, adding to Altegris Clearing Solutions’ deep roster of futures clearing firms with which it maintains introducing relationships. BofA Merrill Lynch is the eighth leading futures commission merchant (FCM) to offer its services to clients of Altegris Clearing Solutions.
A Recent Flourish for Winton Capital
New York Times DealBook
Winton Capital, the money manager well known for its quirky and outspoken founder, a Cambridge University theoretical physicist, recovered from its worst performance since 2008 and posted a gain last month.
**DA: A leading indicator of the managed futures turnaround?
Commodity hedge funds face bleak future
The commodity hedge fund industry is likely to come under greater pressure as weak performance and waning client interest forces major funds to close. The latest victim of this trend is Clive Capital, once one of the world’s largest commodity hedge funds, which last month announced it would wind down and return $1bn to investors. This follows the closure of a number of well-known commodity funds over the past two years, including Arbalet, Bluegold, Centaurus and Fortress.
**DA: Or not.
A changing of the guard in commodities hedge funds
A super-cycle during the last decade, driven by high demand from China, created fertile ground for funds making big, directional bets. However, in more recent years clear trends have deserted the market and volatility has reduced, according to hedge fund managers, resulting in mixed performance and some high-profile closures.
**DA: Or a different take, that the end of the supercycle means long-only managers will not be able to crank out double-digit returns from the golf course.
Commodity managers warm up to metals as world economy improves
Base metals are back in favour with commodity managers after a long period in the dog house, reflecting a new enthusiasm for growth-oriented assets as the global economy picks up. “The key economic regions of the world have either resumed a slight upward trend or have at least put the worst behind them,” said Ronald Wildmann, an adviser to the GFP Long Mining Fund, which returned almost 15 percent in the third quarter. “In China, the hard landing feared by many has not come to pass.”
**DA: And/or one final take, that the long-only managers must be asset class-specific.
Pensions & Institutions
Looking ahead after 4 decades
Pensions & Investments
Evolution and innovation will continue at a rapid pace, radically transforming institutional investment management by the time Pensions & Investments’ 50th anniversary rolls around n 2023. Predictions for changes a decade out range from wholesale abandonment of traditional asset allocation to a return to old-fashioned core-and-satellite portfolio construction with some very modern twists.
Dueling narratives on pensions, Raimondo: A real RI page-turner
The novel “Gone Girl” is a thriller that builds suspense by telling a story, in alternating chapters, from two very different perspectives. Here in Rhode Island, dueling narratives are taking shape about a state treasurer and the pension overhaul that she led. It’s a real page-turner: Will the overhaul survive a court challenge? Will the lead character become governor? Readers want to know.
**DA: A Harlequin-style romance novel featuring money management fees and asset allocations.
The myths behind public-employee pension reform
Since the once-great city of Detroit filed for bankruptcy, Americans everywhere are in a panic. Is my city next? Is my state facing financial disaster? From Wisconsin’s controversial Gov. Scott Walker to New Jersey’s Chris Christie, politicians all over seem to be telling us the answer is yes. The fiscal end is nigh, these leaders say, if America doesn’t act soon to slay one of the last great budgetary dragons held over from the entitlement age: our allegedly outmoded, unsustainably expensive system of state and municipal pensions.
**DA: Here is one thing we can all agree on – taxpayers deserve transparency first and foremost.
CalPERS plans search for hedge fund managed account platform
Pensions & Investments
CalPERS will issue an RFP for a managed account investment platform provider as part of the 2013 – 2014 fiscal year strategic plan for its $5.2 billion hedge fund portfolio, confirmed Joseph DeAnda, a spokesman for the $269.1 billion pension fund.
Investment flows into hedge funds should continue as performance picks up
Unprecedented flows into hedge funds are causing consternation in the popular financial media. Some rather wild accusations and assumptions have so far been left unchallenged. We are about to change that. The flow of money into the industry is a good thing. In fact the flow is not nearly as much as it should be. Too many pension funds, particularly European ones, are sitting on the sidelines, afraid to entrust their capital to the hedge fund community. While it is patently obvious these pension plans will never achieve the returns needed to fund themselves by sticking to bonds and equities, they nevertheless refuse to shift into alternatives and in particular hedge funds.
**DA: But, again, it is hard to convince the pension community to invest in years like this, where performance has lagged but fees have continued to pile up.
CME Group, futures regulator to part with struggling AlphaMetrix
The parent company of a firm CME Group Inc and the National Futures Association hired to help launch a program to improve futures customer protections said on Thursday it had financial problems and was working to improve internal controls.
**DA: Another black eye for the industry.
NFA board members raised concerns about AlphaMetrix
National Futures Association board members had concerns about AlphaMetrix Group LLC, a struggling vendor that was hired by the association and futures exchange operator CME Group Inc. to monitor the balances of futures brokers.
**DA: Due diligence works best when it is conducted beforehand, not afterward.
Dodd-Frank commodity option rules sow confusion among energy firms
As the US Commodity Futures Trading Commission (CFTC) has written thousands of pages of rules to implement the Dodd-Frank Act, many market participants have complained that the new regulations are confusing and difficult to put into practice. But few issues have sown quite as much confusion as the CFTC’s treatment of commodity options. Oil companies, natural gas suppliers and distributors and electric utilities all use various contracts that provide for the physical delivery of an energy commodity with some degree of optionality.