In the current issue, editor-in-chief Jim Kharouf, fresh off the plane from London where he attended the Emerging Manager Forum, offers a few thoughts on the state of the managed futures space. We are nearing a point of closure with the MF Global saga, as the CFTC files a civil suit against Jon Corzine. Altegris Advisors ask, in a new white paper, “Is the trend your friend? Plus, after a rough month in May, it looks like managed futures fared pretty well in the last mini-meltdown.



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Observations – Statistics – Commentary

Living in London
By Jim Kharouf, editor, JLN Managed Futures

Fresh off the plane from London, one thing is clear about the managed futures space – it is vibrant in “the City” and has some nice growth potential. One indication of that was a presentation from Saxo Capital Markets, which introduced its new managed funds services at the CTA Emerging Manager Forum in London last week. The offering aims to help emerging managers through a series of services ranging from connectivity to exchanges to technology that helps monitor positions in real time.

Saxo decided to jump into the space because it already had been providing various services to dozens of hedge fund clients who already had accounts with the bank. So it retooled its offerings and is reaching out to the broader marketplace. It’s just one more bit of evidence that the managed funds space is still attracting attention.

And given the record crowd for the CME’s Pinnacle Awards the prior week, the managed futures space does indeed have some momentum.

P.S. – Thanks to Bucky and Frank for allowing me to speak at their event in London last week on the media space today.

 

Quote of the Day: “There was a gas smell at MF Global, and no one checked the stove.”

– Gary DeWaal, futures industry consultant and former Newedge general counsel, on the CFTC suit against former MF Global CEO Jon Corzine.

London Special Report

 

View Special Report »

London has long been seen as THE global financial center. But given economic, political and regulatory changes, can it retain its title as the world’s top financial marketplace? For many in the financial sector, the answer is yes, but it must navigate some tough political and regulatory challenges from the European Union.

John Lothian News took a 2013 snapshot of the derivatives landscape in London. We spoke with regulators, exchange leaders, buy-side participants and others, and put together this special presentation featuring five short videos, numerous charts, graphs and fun facts, and an in-depth story on the City, from the Big Bang of 1986 to the recent financial crisis and its aftermath.

With the impending regulatory overhaul, changes to financial benchmarks such as LIBOR and threats of transaction taxes and disharmony across jurisdictions, London faces some clear headwinds. With these challenges, though, come opportunities – for exchanges, fund managers, vendors and other service providers. London’s financial landscape will certainly evolve, but will continue moving forward.

As the old World War II poster said, “Keep Calm and Carry On.”

View Special Report »

 

– SPONSORS –

 

Cinnober GH Financial IFM

Is the Trend Your Friend?
Matt Osbourne, Lara Magnusen, Altegris Advisors
In this paper, we revisit the long-term performance characteristics of managed futures, and examine the specific market dynamics that we believe have created a difficult environment for the strategy post Global Financial Crisis. Importantly, we look forward and ask whether it is time for those dynamics to begin shifting back in favor of managed futures investing.
http://jlne.ws/15aP5GG

Rice Elucidates Views on Managed Futures, Retail Investors
AllAboutAlphaT
At the beginning of June, we ran a review of Bob Rice’s recent book, The Alternative Answer, just out from HarperCollins.To encourage further exchange and understanding, I went back to Mr. Rice, after reading a comment from our reader, and asked him to expand on managed funds and their noncorrelation with traditional (largely equity) investment strategies.
http://jlne.ws/12yRudi

Clarity Portfolio Viewer for Managed Futures Debuts New Subscription Packages and Provides More Risk Analytics
PRWeb
Clarity Portfolio Viewer, an online application providing investors and brokers with a clear, composite view of an entire managed futures portfolio by Gate 39 Media, is now available in Single and Basic subscription packages. It also offers 13 new advanced analytics providing investors with more insight into their managed futures investments performance.
http://jlne.ws/17z1QuT

Most of what you know about trend following is wrong
TradingFloor.com
There is a public perception of trend following which is quite far from reality. In the CTA hedge fund trenches, life is far from this public view of trend following. In a series of articles, I will explain how we in the industry trade and view the markets. This first part will focus on concepts. Don’t worry though. All the details will be presented in this series. Including full trading rules.
http://jlne.ws/13lneEx
**DA: Turns out that most of what I know about trend following is right.

Lead Stories

CFTC Sues Jon Corzine Over MF Global Failure; Seeks to Ban Him From Futures Industry
CNBC
U.S. regulators on Thursday settled charges against MF Global over the futures brokerage’s collapse, and also charged former Chief Executive Jon Corzine and former Assistant Treasurer Edith O’Brien in connection with the alleged misuse of customer funds.
http://jlne.ws/128YJ8l
**DA: Better late than never.

GOTCHA! CFTC Files Suit against Corzine, et al: Customers to Receive 100 Percent Recovery
Commodity Customer Coalition
Calling the segregation rules a “cornerstone  of customer protection” laws, the CFTC filed a strongly-worded four count complaint alleging violations of the Commodity Exchange Act in connection with the collapse of MF Global by its CEO Jon Corzine and its Treasurer Edith O’Brien, as well as the firm’s holding company and brokerage subsidiary.  More importantly for victims of MF Global’s collapse,  the CFTC also filed a proposed order settling the charges with the brokerage subsidiary, MF Global, Inc. (“MFGI”), in which customers would be entitled to a 100% recovery of their property.  The order is subject to the approval of the judge overseeing MFGI’s SIPA liquidation.  If all goes according to plan, customers could start receiving final payments as early as late September 2013.
http://jlne.ws/1299983
**DA: A big thanks to Messrs Koutoulas and Roe for continuing to pound this issue.

For MF Global Customers, Corzine Suit Marks a Turning Point
Wall Street Journal
The civil charges levied Thursday against Jon Corzine for his alleged role in the collapse MF Global Holdings Inc. were a welcome development for many former customers of the firm. But Lonnie Becker, a farmer who held an MF Global account, is just glad he’s getting his money back.
http://jlne.ws/18qD2rR

Corzine Defense to Misuse of Customer Cash Is Off Point
Bloomberg
For the Commodity Futures Trading Commission, which said yesterday that Corzine “bears responsibility for MF Global’s unlawful acts,” that defense is irrelevant.
http://jlne.ws/11YfOCj
**DA: The “failure to supervise” rule means that the contemporary CEO may not take credit for the good stuff and play dumb for the bad stuff.

Fugitive financier Marc Rich dies
Financial Times
Marc Rich, the colourful and controversial commodities trader and founder of Glencore who fled the US to avoid federal indictments, has died in Switzerland aged 78.
http://jlne.ws/11YkIz5
**DA: Thorough obit on the Glencore founder – the good, the bad and the ugly.

Managed Futures/Managed Funds

CTAs Lose in June, Looking To Leap Over Market Conditions
Value Walk
CTA trends following trades are set to have a choppy few months ahead as markets move erratically across the globe. CTSd who trade managed futures have continued to underperform in June as volatility spiked in the major markets. Winton Capital Management’s Winton Evolution Fund took a dip of -3.21 percent to June 21, bringing year to date returns to a mere +2.7 percent.
http://jlne.ws/1cvxolv

Commodities traders call end of ‘supercycle’
Financial Times
The commodities “supercycle” is dead. If anyone was still in doubt about whether the era of ever-rising prices driven by rapid Chinese growth was over, events of the past week have surely dispelled it.
The dollar rally after the Federal Reserve’s hints about tapering its “quantitative easing” programme, together with fears about a liquidity crunch in China, have sent a ripple of fear through the commodities industry.
http://jlne.ws/1cHFlEr
**DA: Thanks for the heads-up. Next time, feel free to tell us BEFORE the 40 percent retracement.

Advisers Weigh Cost of a Managed-Futures Cushion
Wall Street Journal
Managed-futures funds, which helped cushion some portfolios during the downturn, continue to attract investors seeking uncorrelated assets despite slipping returns. But the high fees on certain funds are keeping some advisers away and prompting warnings from analysts.
http://jlne.ws/17OA8On
**DA: Sometimes you get what you pay for; sometimes you don’t. Two words: due diligence.

What’s Working Today: Managed Futures (Finally)
Brendan Conway, Barron’s
How’s your “alternative” fund doing in Thursday’s selloff? The label is trendy, but it’s also loosey-goosey. There’s no clear definition of “alternative.” Your best guide, as always, are real-life market returns, which vary widely.
http://jlne.ws/1cHPEs0

Niederhoffer Capital Up 30%, Predicts Doom For Trend Followers
Value Walk
Niederhoffer Capital lost 1.9 percent in its flagship Diversified program which manages $534 million. However returns were up 2.9 percent in this month to June 21. After going through a losing period last year, Niederhoffer has recovered very well through the first half of this year with a +29.9 percent return.
http://jlne.ws/11UmW5Q
**DA: Them’s fightin’ words, Roy.

Pensions & Insti
tutions

Hedge fund managed accounts get serious attention
HedgeCo.net
Institutional investors are taking a hard look at hedge fund managed accounts as they further unwind hedge funds of funds into direct investments in single- and multistrategy hedge funds or move from separate accounts to gain more control of their investments. Large pension funds like the $259.8 billion California Public Employees’ Retirement System are considering a move to a managed account investment structure.
http://jlne.ws/14J3ozD

APG looks to swap futures to reduce costs
Investment & Pensions in Europe
APG, the €336bn pensions provider and asset manager, is studying the possibility of using swap futures – a derivative instrument under development in the US – as a means of cutting the cost of initial margins in central clearing.
http://jlne.ws/13hmd1C

Top 100 Pension Funds Report: Bouncing back
Benefits Canada
The past few years for the pension industry have been difficult, to put it mildly. But for the Top 100 pension plans, things are starting to look up. Pension assets have cracked the $800-billion mark for the first time ever and are closing in on $900 billion. Assets climbed nearly 10%, with a number of plans reporting double-digit increases. And there was just one plan that reported a decline in assets, compared with 26 in 2011
http://jlne.ws/1cHZiLs
**DA: If only we could have a 16 percent return in the equity market every year.

Greatest risk is remaining risk averse for too long
BusinessReport
In the past five years, the markets have crashed several times, destroying value. This has eroded investors’ confidence in traditional diversification. Many are now very risk averse and are looking for what they consider to be havens for their money. This risk-averse approach exacerbates, rather than reduces, the problems investors face in the long term.
http://jlne.ws/17zgEcS
**DA: Return on principal vs. return of principal.

Regulation

CME Pulls Plan to Update Wash Trade Rule Amid CFTC Criticism
Bloomberg
The Chicago-based exchange operator told traders in a notice on its website today that it won’t implement the system on July 1, following discussions with the CFTC’s division of market oversight. The June 17 proposal clarified the circumstances that define wash trades.
http://jlne.ws/19NTFyU
**DA: Real liquidity is good for CTAs and account managers; fake liquidity is bad. We are getting closer to a solution but apparently we are not there yet.

SEC Nominees Say Agency Must Finish Dodd-Frank, Jobs Act Rules
Bloomberg
Two U.S. Senate staff members nominated to join the Securities and Exchange Commission said today the agency should focus on finishing rules mandated by Congress.
http://jlne.ws/13d6m2W

Clearing up the rules on promoting AIFs: FCA
FT Adviser
The Financial Conduct Authority has published rules governing the way the UK implements the European Union’s alternative investment fund managers’ directive and introduced two legal forms of tax-transparent funds.
http://jlne.ws/10uxO9K
**DA: Update from across the pond. For more on AIFMD, go to MarketsReformWiki.

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