The managed futures space continues to show it is indeed making the leap into mainstream investment circles. Check out the Financial Times’ piece “Managed Futures Reach Retail Portfolios” to see just how far and where this trading base is moving. It certainly fits with our recent interview with Dan Hart, of Cortland Fund Services. CME Group and BarclayHedge (no relation to Barclays, the bigger and legally more imposing bank) held the first annual Pinnacle Awards on June 11, at which 25 performance-based awards, across seven different categories were given.

Quote of the Day

That drive of assets is getting into the mainstream now and you’re seeing more allocation to these instruments. I wish Wall Street and investment banks were thinking about this 10 years ago … unfortunately it takes event like the last decade to get allocation to this type of asset class.

-Joe Barrato, Arrow’s CEO and director of investment strategies in FT’s piece “Managed futures reach retail portfolios.”

Observations – Statistics – Commentary

A Pat On The Back
Jim Kharouf

The managed futures space must be doing something right if the latest event, and next one, are any indication. The CME and BarclayHedge (no relation to Barclays, the bigger and legally more imposing bank) held the first annual Pinnacle Awards on June 11 where 25 performance-based awards, across seven different categories were given. (Click HERE for the winners) It was a well planned and executed event. Next up CTA Expo, which is growing each year, is hosting its London Emerging Manager Forum on June 28. I will be there for the event, as well as the IDX show earlier in the week.

The managed futures space continues to show it is indeed making the leap into mainstream investment circles. Check out the Financial Times’ piece “Managed Futures Reach Retail Portfolios” to see just how far and where this trading base is moving. It certainly fits with our recent interview with Dan Hart, of Cortland Fund Services.

Managed Futures indeed are heading onward and upward.

NIBA Summer Conference, June 21, 2012, Kansas City Board of Trade
National Introducing Brokers Association
Are you confused about how to comply with CFTC Rule 1.71? Do you wonder what the MF Global trustee is doing about your security deposit? Jennifer Sunu of the NFA and Neal Stevens, Esq. of Schuyler, Roche & Crisham will lead a discussion of these hot topics in our Legal Update Session, 3:30pm during the NIBA Summer meeting, hosted by the Kansas City Board of Trade, Thursday afternoon, June 21, 2012.
http://jlne.ws/M8LoUe

Black box funds profit in May from markets’ slide
Reuters
A top performer was Chicago-based Clarke Capital Management, whose $49 million Millennium Fund soared by 46.5 percent and its $20 million Jupiter Fund by 39.7 percent in May.”
http://jlne.ws/ORDfb7
**JK – Not a Pinnacle Award winner this year but those are winning numbers.

Managed Futures Reach Retail Portfolios
FT
Last year recorded 13 new managed futures mutual funds launched in the US market, more than double the number in 2010 and 2009, according to a new study issued late last month by Morningstar and Barron’s.
http://jlne.ws/M6pfds
**JK – Great look at managed futures mutual funds. Also in the story: Managed futures funds, tracked by Morningstar, showed total assets of $7.5 billion in 2012, up from $4.3 billion in 2010.

Webinar Monday, June 19, 2012 – Managed Futures: An In-Depth Look at an Overlooked Asset Class
Attain Capital Management
Managed futures has surged in popularity since 2008, but many investors still don’t fully understand what it is or why they should consider it. The webinar, which will feature several industry experts, covers all the basics of managed futures investing.
http://jlne.ws/L1gp2W

What does it take to get investment consultants and managers together?
By Charles French, CAIA, AllAboutAlpha
It’s a common frustration – investment managers believe they have a world-class product but don’t understand why they cannot gain approval with respected investment consultants. From their perspective, they have “checked all the boxes” and firmly believe that their product should be included in all consultant driven manager searches. Their product has an established track record, superior performance against both peers and benchmarks, the investment approach can be articulated and the operation does not have any “red flags”. What’s the mystery ingredient? What is missing?
http://jlne.ws/McckVo
**DA: Good tips from fellow CAIA Chuck French, whom I met a recent Chicago chapter meeting.

Managed Futures Scorecard   6/15/2012
     
Newedge Indices MTD Return YTD Return
Newedge CTA Index -1.82% 0.65%
Newedge CTA Trend Sub-Index -2.65% 1.28%
Newedge Trend Indicator 3.92% -6.37%
Newedge Short-Term Traders Index -1.01% -0.39%
     
Barclay Indices MTD Return YTD Return
Barclay CTA Index   1.93%
Barclay UCITS Index   1.90%
Barclay Hedge Fund Index   1.74%
BTOP FX Index -0.82% 0.63%
BTOP 50 Index -1.00% 0.70%
Morningstar Long/Short Com. Index 0.02% 0.72%

Lead Stories

TrimTabs and BarclayHedge Report Hedge Funds Redeemed $5.1 Billion in April 2012
BarclayHedge
BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry redeemed $5.1 billion (0.3% of assets) in April, reversing a $2.8 billion inflow in March. Based on data from 3,042 funds, the April TrimTabs/BarclayHedge Hedge Fund Flow Report estimated that industry assets stood at $1.7 trillion in April, up 1.6% for the first four months of 2012.
http://jlne.ws/LCuQHw
**DA: From the report: More than $12.7 billion flowed out of the hedge fund industry between May 2011 and April 2012, a”sharp contrast from the previous 12 months, when the industry saw a net inflow of $90.7 billion,” according to BarclayHedge president and founder Sol Waksman.

Citi Prime Finance Survey shows Hedge Fund Assets doubling in 5 years
HedgeCo.Net
A recent study from Citi Prime Finance projects a doubling of assets in upcoming years. This news comes on the heels of a Reuters report that shows $5 Billion outflows in the month of April.
http://jlne.ws/KHjZL0
**THE REPORT:
Institutional Investment in Hedge Funds: Evolving Investor Portfolio Construction Drives Product Convergence – June 2012 – Citi –  http://jlne.ws/LS4pQh

China futures firms eye asset management
AsianInvestor
CTA funds look poised to take off in China after securities regulator CSRC put forward plans to permit domestic futures companies to roll out asset management businesses.
http://jlne.ws/LjXkp2

A True CTA will stick to chosen path
FT
Should investors favour the systematic approach, sometimes known as a black box approach, that relies on computers responding to the asset selection instructions programmed into it and removes any element of panic in attempting to ride changes in market conditions?”
http://jlne.ws/LLAOWs
**JK – Mark Shore is featured in this piece as well.

CME to Return $130 Million in MF Global Assets
NYTimes.com
The CME Group agreed on Thursday to return more than $130 million in MF Global assets to a trustee for the failed brokerage firm, helping to speed the distribution of customer money. If the agreement is approved by the federal bankruptcy judge overseeing the case, the assets would be split between MF Global’s domestic brokerage customers and those who held foreign exchange accounts.
http://jlne.ws/NmBqFS

Managed Futures/Managed Funds

Astenbeck hedge fund down 14 percent in Mensis Horribilis
Reuters
Andrew Hall’s $3.1 billion commodity hedge fund lost 14.4 percent in May, as crude prices tumbled a month after the legendary energy trader told investors he was bullish on oil because of tightening global supplies, according to sources familiar with the fund’s performance.
http://jlne.ws/NDOKEJ
**DA: Ouch.

Global worries forecast to boost flow of assets
FT.com
With managed futures assets typically accounting for about 15 per cent of all hedge fund dollars, the strategy is benefiting from the return of investors into alternative assets. According to HFR, the industry data tracker, total hedge fund assets have soared from $1.41tn at the end of 2008 to $2.13tn at the end of this year’s first quarter. Managed futures assets, as tracked by BarclayHedge, have risen even faster over the same time, jumping from $206bn to more than $328bn.
http://jlne.ws/KNvu1E

Finland-Based Estlander & Partners Expands Hedge Fund Operations To U.S.
Hedge.co
Estlander & Partners, Inc., a Finnish alternative hedge fund investment management company and Commodity Trading Advisor (CTA) has launched of its U.S. operations based in Stamford, Connecticut, which will be led by Dan Rizzuto, CFA, as Director/Head of North America and a member of the Firm’s executive committee.
http://jlne.ws/MXJ0o4

Hedge Fund Association expands presence in China
Opalesque
Opalesque Industry Update: In its continuing effort to support the global hedge fund industry through education and advocacy, the Hedge Fund Association (HFA) today announced that Adam J. Steinberg, a financial communications consultant in Beijing, has been tapped to serve as the new director of the HFA’s China chapter.
http://jlne.ws/MvCdBi
**DA: The LME isn’t the only entity shifting eastward.

Tool toughened in testing times
FT.com
When markets collapsed with the twin towers of the World Trade Center in 2001, managed futures held their ground, gaining 84 basis points for the year, reports industry data-tracker BarclayHedge. And when the bear market sunk its teeth into stocks the following year, with the MSCI World Index having lost a quarter of its value, managed futures gained more than 12 per cent.
http://jlne.ws/NrSIl8
**DA: Article includes a brief interview with Graham Capital’s Ken Tropin, winner of a Lifetime Achievement Award at this week’s Pinnacle Awards.

Hedge funds pile up profits from M&A boom missed by most investors due to “can’t make money in Japan” bias
Opalesque
When it comes to investing into Japan, many global investors believe that “nobody can make money in Japan.” But the reality is that this attitude makes it easier for the remaining players to make money in this market. While long-only investors in Japan, including domestic pension funds, are withdrawing from the markets, the hedge fund space continues to make money. As everywhere else, the hedge fund space has also contracted in Japan, however the opportunity set has grown at the same time.
http://jlne.ws/MEGyyL

Samena Capital Taps Tycoon Shareholders for Investment Ideas
Institutional Investor
WHEN 46 SHAREHOLDERS OF SAMENA CAPITAL gathered in Istanbul for an April meeting, they attracted so much attention that two senior Turkish government officials and several international dignitaries gave presentations. The audience was equally illustrious. It included Atul Punj, founder and chairman of Punj Lloyd Group, one of India’s largest construction and engineering firms; V-Nee Yeh, co-founder and honorary chairman of Value Partners Group, which ranks among Asia’s biggest asset managers; and Samir Fancy, founder and chairman of Renaissance Services SAOG, Oman’s premier oil and gas services company.
http://jlne.ws/KzKyGD

Pensions & Institutions

The world’s richest sovereign funds
Opalesque
According to figures from research firm Sovereign Wealth Fund Institute, the UAE capital’s Abu Dhabi Investment Authority is head and shoulders above Norway’s Government Pension Fund – Global with US$611.
http://jlne.ws/LgIBhx

Looking at Alternative Investments From the Inside Out: An Interview with Dr. Bob Swarup
AllAboutAlpha
The global financial crisis has severely affected the attractiveness of equity, bond, cash and real-estate instruments (the typical main-stay of portfolio management) meaning that alternative classes are coming to the fore as instruments for diversification and risk management together with being in many cases, the primary investment vehicle for many strategies. To learn more about the alternative investment market I spoke to Dr. Bob Swarup who is a world-renowned expert and commentator on alternatives and financial markets as well as being a visiting fellow at London School of Economics.
http://jlne.ws/LcVxoG

New Approach to Portfolio Construction Required, say UK Financial Advisers
Marketwatch
Against the backdrop of volatile markets, seven in ten advisers (71%) say the majority of their clients are conflicted between pursuing return and protecting capital. Advisers, recognising their clients’ anxiety and the need for more durable portfolios, want to explore new approaches towards portfolio construction. The results also highlight investors’ concerns about political and economic issues.
http://jlne.ws/KzBP78
**DA: Lots of good stats regarding adviser trends, including one that says 8 percent of advisers still believe in the 60/40 portfolio mix. Reminds me of Lou Mannheim, Hal Holbrook’s character in Wall Street. “Fundamentals, Bud!”

Neuberger joins crowded — and pricey — multialternatives universe
InvestmentNews
Neuberger Berman Group LLC is the latest firm to join the increasingly competitive multialternatives category. Multialternatives mutual funds, which combine several alternatives strategies in a single fund, has been the most popular alternatives category for new fund launches over the past four years. Since 2008, 58 new multialternative funds have launched, according to Morningstar Inc. The long/short equity category had the second most launches with 46.
http://jlne.ws/OS7LkU

Video: Managers need to embrace transparency to be attractive to investors, says Albourne’s Ruddick
Hedge Funds Review
Simon Ruddick, co-founder and managing director of hedge fund advisory Albourne Partners, speaks frankly about how managers should use transparency to become more attractive to investors.
http://jlne.ws/MEI2ZE

China pension fund returns tumble in 2011 on sluggish markets
Reuters
China’s National Social Security Fund (NSSF) saw its annual investment return tumble to 0.8 percent last year, from 4.2 percent in 2010, hit by sluggish domestic markets, the official China Securities Journal reported on Friday.
http://jlne.ws/L1lfwR
**DA: Add China to the list of things, such as U.S. housing prices, that used to only go up.

Mexico $121 Billion Pension Funds Can Invest in Commodities
Businessweek
Mexico’s pension funds, the nation’s largest institutional investors, will be allowed to invest in most commodity-linked securities starting June 20 as regulators seek to allow them to diversify investments.
http://jlne.ws/MOL668

Regulation

Dodd-Frank leaves its mark
FT.com
While there have been sanctions for infringements of position limits in key contracts or markets, or fines for failure to make adequate disclosures, CTAs have not suffered from the kind of high-profile frauds that have dogged the until-now more free-wheeling hedge fund industry in general.
http://jlne.ws/L9xN3p

KPMG and AxiomSL Form Alliance to Assist Investment Advisers Faced with New Regulatory Requirements Including Form PF
Press release
KPMG LLP, the audit, tax and advisory firm, and a leader in the Financial Services sector, has formed an alliance with Axiom Software Laboratories, Inc. (AxiomSL), a leading global provider of regulatory reporting and risk management solutions, to address new regulatory requirements facing investment advisors, including Form PF.
http://jlne.ws/L1graR

Dems: Cuts to CFTC will hurt oversight
Politico
Democratic leaders blasted Republicans Friday for proposing cuts to regulatory agencies responsible for preventing excessive speculation that led to the 2008 economic crisis. Rep. Barney Frank (D-Mass.), a co-sponsor of the Dodd-Frank financial reforms that tightened oversight of the derivatives market, brought a handful of industry leaders and lawmakers to Capitol Hill Friday to push back on the House GOP spending bill that would cut the Commodity Futures Trading Commission (CFTC) by 12 percent.
http://jlne.ws/LI0Czs
**DA: The commission was criticized for being slow to implement regulatory reform and technology upgrades. Exactly how will LESS money help in that regard?

Global regulators seek wider disclosure for oil traders
Reuters
Global financial markets regulators are seeking to impose unprecedented disclosure rules on oil traders, stepping up a campaign ordered by the world’s biggest economies to combat manipulation in energy markets. The International Organisation of Securities Commissions (IOSCO) was charged last year by the Group of 20 (G20) top economies with looking into the role of oil price reporting agencies (PRAs) and the huge swings in oil markets of the past years.
http://jlne.ws/KTs4Az

On eve of advertising era, hedge funds want SEC clarity
Connecticut Post
On the verge of being able to at last advertise, the hedge fund industry is looking for more clarity on how to determine who can be an eligible client. The SEC is expected to release rules on the Job Act, which allows for hedge funds to advertise their services but still limits their clientele to accredited investors in July.
http://jlne.ws/McKs14

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