In this issue, attorney Bart Mallon slices and dices the provision in the JOBS Act calling for a loosening of marketing restrictions for hedge funds. The Wisdom Tree managed futures fund wins a “most innovative ETF” award. And, as some of the larger trend followers become too big to trade incognito, some investors are turning to smaller “niche” funds.
Quote of the Day
“If you’re on a gurney, about to go into surgery, do you raise your hand and ask, “Can I have the cheapest surgeon?” No, you want the best surgeon. So I think the average investor has to think about having exposure to alternatives, because all that means is you have exposure to skill-based managers.”
-Mark Yusko, founder and head of Morgan Creek Capital Management, on the nature of alternative investments.
Observations – Statistics – Commentary
Hedge Fund Marketing and the JOBS Act – Five Minutes with Bart Mallon, Cole-Frieman, Mallon & Hunt LLP
On April 5, 2012 President Obama signed into law the Jumpstart Our Business Startups Act (“JOBS Act”). Inserted into the Act were provisions on hedge fund marketing and accredited investor restrictions. John Lothian News Editor-at-Large Doug Ashburn spoke with Bart Mallon of Cole-Frieman, Mallon & Hunt LLP about the JOBS Act provisions, what they entail and how it will affect the hedge fund community.
Managed Futures Pinnacle Awards
CME Group and BarclayHedge proudly present the first and only awards event to recognize excellence exclusively in the managed futures space. On June 11, the Managed Futures Pinnacle Awards will honor the top managers in the industry today, and provide opportunities for managers to meet new investors.
|Managed Futures Scorecard||4/30/2012|
|Newedge Indices||MTD Return||YTD Return|
|Newedge CTA Index||-0.06%||-0.59%|
|Newedge CTA Trend Sub-Index||0.53%||0.81%|
|Newedge Trend Indicator||-2.07%||-3.39%|
|Newedge Short-Term Traders Index||0.06%||-2.26%|
|Barclay Indices||MTD Return||YTD Return|
|Barclay CTA Index||-0.55%|
|Barclay UCITS Index||5.78%|
|Barclay Hedge Fund Index||5.56%|
|BTOP FX Index||0.27%||0.77%|
|Morningstar Long/Short Com. Index||0.85%||3.13%|
WisdomTree Receives Award for ‘Most Innovative ETF’ for Managed Futures Strategy Fund (WDTI)
WisdomTree, an exchange-traded fund sponsor and asset manager, announced the WisdomTree Managed Futures Strategy Fund (WDTI) has been recognized as the ‘Most Innovative ETF in 2011’ by a committee of analysts who cover ETFs in connection with Capital Link’s 11th Annual Closed-End Fund and Global ETF Forum.
Hedge funds in pole but is it enough?
I do not doubt that hedge funds can produce a strong return for a reasonable amount of risk. But what I do doubt, and what investors need to know, is whether hedge fund managers really exploit the advantages of their business model well enough to justify the fees they charge.
**JK – This article brings up the good question of whether the hedge fund strategy is scalable.
Don’t Bank On It
Alternative Investing By GREGORY ZUCKERMAN – WSJ.com
Leveraged loans and managed futures offer opportunities, but beware risks
**DA: Article quotes several wealth management executives who question the sometimes-high fee structures associated with managed futures. What did the pot call the kettle?
PerTrac: Largest Hedge Funds Continue to Dominate
Single-manager hedge funds with greater than $1 billion under management account for a mere 3.9% of reporting funds, but they control about 60% of the total single-manager hedge fund assets, according to a study conducted by PerTrac.
Actively Managed ETFs
With the launch on Thursday of three new funds offered by State Street, there are now 47 actively managed ETFs total, which compares to around 1,500 exchange-traded products overall. In spite of the relatively low numbers, actively managed funds represent the future of the industry, Morrison said.
**JK – Interesting look at actively managed ETFs.
Once Reviled, Hedge-Fund Manager Rebounds
Rapidly hitting the buttons on his calculator, John Devaney totes up some of the things he had to jettison as his hedge fund crashed: a $36 million jet, $10 million helicopter, $45 million art collection and $22 million yacht called “Positive Carry,” named for an investment strategy that rakes in easy money.
Merlin Develops Decomposition Tool for ETFs
Merlin’s ETF decomposition tool allows clients to run a position report that can tell them their total exposure to a stock, whether it is held outright or indirectly through an ETF. The tool can be used for risk management and to help attribute portions of fund performance to individual stocks.
**JK – At first glance, I’m not crazy about something being called a decomposition tool. But on second look, it’s an interesting idea.
Managed Futures/Managed Funds
Eze Castle releases white paper on tech solutions for Form PF
Eze Castle has released a new white paper providing an in-depth examination of the challenges that Form Private Fund (Form PF) regulation poses to hedge funds. It also looks at the factors that customers should consider when making technology decisions for filing and data management.
**The White Paper, “Preparing for Form PF” can be accessed through the press release HERE.
Analysis: Smaller managed futures funds tempt investors
Smaller managed futures funds able to exploit niche commodity markets and the most volatile conditions are increasingly likely to win assets from investors disappointed with returns from the big trend-followers that dominate the industry.
**DA: No easy feat for a $10 billion fund to make a move in, say, the cocoa market without affecting the price.
Volatility Returned Briefly in April, Smacking Hedge Funds
Stock-trading hedge funds looking to extend their first-quarter rebound ran into a familiar adversary this month: a nervous market.
Managed Futures Strategies
In recent years, the asset class and investment approach has started to become democratized in more retail-friendly vehicles. Today investors can access the benefits of managed futures by not only investing with the traditional commodity trading advisors (CTAs), but also by investing in mutual funds and exchange-traded funds.
Analysis of Hedge Fund Influence in New York State Politics
Of the Top 20 recipients of hedge fund dollars Governor Andrew Cuomo ($3,486,162.90) and former Governor Eliot Spitzer ($1,947,192.44) lead the list. 14 of the Top 20 recipients are statewide candidates, reflecting the sky-high contribution limits for these offices.
William Blair & Company Introduces Commodity Strategy Long/Short Fund
The Commodity Strategy Long/Short Fund is designed to give broad exposure to commodities and seeks to provide attractive risk-adjusted returns with low correlations to traditional asset classes. It is also expected to maintain the inflation protection of commodities investing, while maintaining the ability to profit in both up and down commodity markets. The fund is actively managed and uses a multi-manager approach, typically providing exposure to between 6 and 15 commodity trading strategies.
TFG Systems Appoints Marc Sharman to Manage Outsourcing Service to Hedge Funds
TFG will offer hedge funds an outsourced operations service, leveraging their industry expertise to manage fund operations, covering: trade confirmation, trade related settlements, trade feeds to relevant counterparties, reconciliation, and reporting.
Pensions and Institutions
A Chat With Mark Yusko
Mark Yusko is the founder and head of Morgan Creek Capital Management LLC. From 1998 to 2004, he led the endowment office at the University of North Carolina at Chapel Hill. Journal of Indexes caught up with him recently to discuss the nature of alternative investments.
Defined benefits are being re-imagined
Mitchell Schnurman, Star-Telegram.com
Traditional pensions are struggling for many reasons: low investment returns, too-generous benefits, and the happy fact that people are living longer than expected. But to understand why pensions can’t seem to break a sorry cycle, look no further than what happened last week in Fort Worth.
**DA: From the article: “At the end of 2007, before the Great Recession and stock dive, Lockheed’s accrued pension liability was about $1 billion. On Dec. 31, it was $13.5 billion.” Yowza!
BlackRock Said to Plan Asia Investment Fund With CIC
CIC, the nation’s sovereign-wealth fund, and BlackRock will initially provide capital for the investments, which would be in Chinese companies and businesses that sell products in China, said the person, who asked not to be identified because the details aren’t public.
Video: Mark O’Hare, Founder & CEO, Preqin
AllAboutAlpha: Hedge Fund Trends & Alternative Investment Analysis
Mark O’Hare, Founder & CEO, Preqin, discusses the future of alternative investments and their role in institutional portfolios, private equity, data transparency, and the need for education in the alternative investment industry.
Japanese Pensions Plan More Alternative Investments After AIJ
Retirement funds that plan to increase investments in the asset class, which includes hedge funds and private-equity funds, in the current fiscal year that started April 1 totaled 20.6 percent, according to the survey by JPMorgan’s Tokyo-based asset management unit. That was the most among 10 asset types.
Japan’s Pension Fund Association (PFA) Selects MSCI’s RiskMetrics HedgePlatform
MSCI Inc. MSCI -0.65% , a leading provider of investment decision support tools, announced today that Japan’s Pension Fund Association (PFA) has chosen RiskMetrics HedgePlatform as their hedge fund transparency provider.
As private equity portfolios expand globally, emerging markets see growing share
Pensions & Investments
More private equity investors are delving into emerging markets, but significant hurdles remain to finding sustained outperformance, according to consultants and pension fund executives.
Regulations face implementation hurdles and could curb innovation, warns NYSE Euronext
Hedge Funds Review
Regulators in the US and EU face problems in implementation of the myriad rules created through Dodd-Frank and various European legislation, warns NYSE Euronext’s Garry Jones. The move to clearing over-the-counter derivatives on exchanges may be heading in the right direction on paper but implementation is going to be difficult on both sides of the Atlantic.
Hedge fund managers need to pay closer attention to details of regulation to avoid compliance pitfalls
Hedge Funds Review
Hedge funds are in danger of missing important compliance criteria if they do not keep on top of the fine print of regulation, according to Marie Defalco, vice chair of the investment management group at US law firm Lowenstein Sandler. “You almost have to have someone in the house that’s focusing on [just regulation]. If you’re a smaller fund and you can’t afford in-house general counsel, you have to have someone that is doing the co-ordination with outside counsel, staying aware,” advises Defalco.
**DA: We refer to Dodd-Frank as the “Attorneys and Compliance Professionals’ Full-Employment Act of 2010.”
CFTC Sued by Fund Industry to Overturn Registration Rule
The U.S. Commodity Futures Trading Commission was sued by two business groups seeking to overturn a rule requiring mutual funds with commodities investments to register with the agency. The CFTC didn’t properly assess the costs and benefits when it imposed the regulation in a 4-1 vote in February, the U.S. Chamber of Commerce and the Investment Company Institute argue in a lawsuit filed today in federal court in Washington. The measure is unnecessary, they said, because mutual funds are already overseen by the Securities and Exchange Commission.
**DA: The cost-benefit red-herring is being used to challenge several sections of Dodd-Frank. For more on this, see the cost-benefit page on MarketsReformWiki