Today’s newsletter features an interesting video from Cinnober’s Nils-Robert Persson, who talks about the evolution of real time risk management. The Commodity Customer Coalition is surveying for interest in an insurance plan for futures customers while Man Group takes a hit.
Quote of the Day:”The longer-term slowdown in China will be well anticipated but it will be another five years before the boom times are over in China and there will be other emerging market countries on the rise.”
CME Group Chief Economist Bluford Putnam, in the article “Investors Stick with Commodities
Observations – Statistics – Commentary
CTA Expo New York, April 25, 2013
We now have over 210 registered, including 24 traders, for CTA Expo New York, April 25, 2013 at the CME Group Building (NYMEX Building). We are at over 50% of our limited capacity for CTA Expo New York and we anticipate selling out in advance of the conference. Visit the CTA Expo web site to view the complete demographics for CTA Expo conferences as well as our Promotional Demographics.
CCC Launches Insurance Surveys
John Roe, Commodity Customer Coalition
The Commodity Customer Coalition has launched two surveys to measure market sentiment and gather data to help determine the feasibility of its private commodity account insurance proposal, the Commodity Insurance Corporation. There are two surveys: one for public commodity customers and one for NFA Members and Member Firms (IBs, CTAs & CPOs).
**DA: Please go to the site and take one, or both, of the surveys. The data you submit will remain anonymous. To view the video Mr. Roe made for our Restoring Customer Confidence series, click the link below.
Interest Rate Swap Futures: Finally the Right Time
by Sean Owens, Woodbine Associates
After three decades of increasing use of OTC derivatives for sophisticated, customized and even generic forms of risk transfer (call it “swap-ification” of risk), the frameworks being implemented via Title VII and Basel III are compelling participants to migrate to more generic products for trading and hedging.
Fitch expects East Asian markets to show most growth
The Asian region has a large, growing middle class population with a low penetration of managed products at 5 per cent of total financial assets on average compared with 15 per cent in western countries.
**JK – Interesting stat. Opportunity for managed funds?
Man takes $837m GLG writedown
The listed hedge fund manager announced it has written down a total of $837m against the value of its May 2010 acquisition, which pushed the group into a bottom-line loss of $745m in the year to December. According to Man, the writedowns resulted from “challenging market conditions”. It wrote down $746m against GLG at the end of 2012. This added to a $91m GLG provision made in June, when Man also wrote down its multi-manager business by $142m. The Financial Times reported in December that the firm was considering a significant writedown in the book value of GLG.
**DA: Does this mean that there were no “challenging market conditions” prior to the acquisition in May 2010? Perhaps it is simply a case of Caveat Emptor.
Man Group Combines Hedge Fund Units, Names Ellis as President
By Chris Larson – Bloomberg
Man Group Plc, the biggest publicly traded hedge fund manager, combined two computer-driven hedge fund units and made management changes in recent weeks before Emmanuel Roman takes over as chief executive officer next week.
Commodity funds: Glimmer of light following tough 2012
Commodity hedge funds have been in the doldrums somewhat, as the macroeconomic climate continues to make life difficult for managers. Performance, in effect, just hasn’t stacked up, leading to some institutional investors heading for the exit. As the Financial Times reported on 6 February 2013, industry executives estimate that overall AUM in the commodity hedge fund sector has fallen “by at least 20 per cent in the past year, and perhaps by more than a third”.
**DA: If you spend your investment life chasing the hot money in reactionary fashion, you will never catch up with it.
Hedge funds seen behind likely VIX short squeeze
Hedge funds have levered up their short plays on VIX futures to such extreme levels that the market is poised for a significant short squeeze. According to the latest available Commitment of Traders data published by the Commodity Futures Trading Commission, the hedge fund community is currently net short the CBOE’s Volatility Index (VIX) to the tune of US$85m vega notional via futures contracts. That level is down slightly from US$108m at the end of January. In June, that net exposure was zero – and the swing in exposure means a short squeeze on the VIX is likely if not inevitable.
Managed Futures/Managed Funds
Investors stick with commodities
“Oil, gold and copper just are not what they used to be,” muses Blu Putnam, chief economist at the CME Group. “The hedge funds trading them got whipsawed last year.” Indeed, several high-profile commodities funds closed their doors last year because of poor performance and Clive Capital and BlueGold were among several large billion-dollar commodities funds to suffer hefty losses in 2012. The January revelation that the California Public Employees’ Retirement System pension fund (Calpers) had more than halved its commodities exposure to just $1.57 billion (0.6% of exposure) from $3.45 billion in September 2012 started speculation that an exodus from the sector is imminent.
2100 Xenon Group won IAIR Hedge Funds Awards
International Alternative Investment Review
2100 Xenon Group won IAIR Hedge Funds Awards as Excellence in Hedge Funds Management/CTA USA with the following motivation: “For the return provided to the investors thanks to the diversification strategy and the investment instruments that are able to give absolute returns despite the markets in this period of crisis”.
Triton Capital Advisors Expands to Boston
Triton Capital Advisors is bringing its specialized managed futures services to the East Coast. The independent provider of alternative investment services announced the opening of a new office in Boston, Massachusetts. Jeff Garcia, a veteran of the alternative investment industry, will helm the branch. Garcia joins Triton as Vice President.
Manage Risk And Diversify With Alternative ETFs
Exchange traded funds have helped democratize exposure to the markets, allowing retail investors to manage risk and improve diversification through alternative exchange traded fund strategies. Specifically, individual portfolios are beginning fill up with alternative asset classes like commodities, 130/30, long/short and non-traditional fixed-income strategies as the ETF industry produces a wider range of products
The 40 Highest-Earning Hedge Fund Managers And Traders
While 2012 was not a great year for the average hedge fund, which underperformed the U.S. stock market, traders who oversee large hedge funds didn’t need to match the S&P 500 index’s 16% performance to make a lot of money last year. In total, the 40 highest-earning hedge fund managers and traders made a combined $16.7 billion in 2012, with the lowest earning managers on our list making $90 million.
Pensions & Institutions
Analysis: What will come of Canada’s defined benefit pensions?
A $400-billion shortfall forcing plan sponsors to re-evaluate the future of defined benefit pensions.
There was a time not so long ago when business leaders and investors paid little mind to the issue of pension solvency. Pensions, after all, were designed to be self-sustaining investments that would allow employers to attract and retain a loyal and dedicated workforce. The latter part is still true today, the former less so.
Calpers to Boost Allocations to Event-Driven, Macro Funds
The biggest U.S. pension fund aims to invest 5 percent of its hedge-fund portfolio with event-driven managers, up from zero in its current weighting, and increase investments in global macro funds to 10 percent from 2 percent, according to a presentation posted on the system’s website.
Deutsche Bank Alternative Investment Survey identifies investor expectations for 2013
Deutsche Bank announced the results of its eleventh annual Alternative Investor Survey, the largest and longest standing hedge fund investor survey with over 300 investor entities worldwide managing more than $1.2 trillion in hedge fund assets participating.
South Carolina Pension’s Hedge-Fund Bet Trails as Fees Soar
South Carolina’s $27 billion pension dove into private equity and hedge funds in 2008, hoping to increase returns that were at the bottom tenth of public- employee retirement funds. Five years and $1.2 billion in fees later, its annualized gain of 1.3 percent still trails the median among public pension-systems, according to data compiled by Wilshire Associates Inc. In neighboring Georgia, the $53.5 billion teachers’ pension buys only st
ocks and bonds. It paid money managers $119.5 million over the same period and its annualized returns of 2.95 percent were in the top quartile.
**DA: Heads, the political status quo wins; tails, the taxpayers lose.
Debate Heats Up over Public Pension Fund Discount Rates
Record low interest rates stir controversy over the way funds value future liabilities and expose a major difference between the US and Europe.
US watchdog set to weaken derivatives rules
Shahien Nasiripour in Washington and Michael Mackenzie and Tom Braithwaite in New York – FT.com
A leading US regulator is poised to water down rules for derivatives trading that critics argue will allow global banks to preserve their dominance of the market. Mark Wetjen, seen as the swing vote on the five-person Commodity Futures Trading Commission, recommended this week in a confidential agency memorandum that the CFTC alter its proposed rule regarding derivatives marketplaces, or “swap execution facilities”, according to people who have seen the document.
New Wall Street tax bills unveiled in US House, Senate
US Senator Tom Harkin, an Iowa Democrat, and Representative Peter DeFazio, an Oregon Democrat, on Thursday again introduced bills to place a 0.03% tax on futures, swaps and other derivatives.