JLN Managed Futures

Commentary: Attorney Bart Mallon on the JOBS Act and Hedge Fund Marketing

noreply@blogger.com (Douglas Ashburn) — Thu, 26 Apr 2012 16:04:00 +0000

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.

Q: 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. What exactly do the provisions entail?

A: There is not actually any change in marketing provisions per se. What happened is the JOBS Act repealed earlier provisions in the securities laws which did not allow managers to have general solicitations with respect to their offerings. This essentially meant that managers could not solicit by advertising to the public through these private offerings and so managers really had to be careful when trying to grow the assets of their fund. One of the important things to note with respect to the provisions of the JOBS Act is that they can only market more freely if all of the investors of the fund are accredited investors. If they have non-accredited investors coming into the fund, then they cannot use these more liberal advertising means in order to solicit investors.

Q: Does this affect all types of fund structures?

A: For a 3(c)(1) fund structure, the accredited investor limit does not change. These managers are still limited to 99 individual investors. For 3(c)(7) funds, previously the limit was 499 investors. Now, that can be bumped up to 1999 investors. For 3(c)(7) funds, though, all investors must be qualified purchasers, which is actually a higher threshold than that of accredited investors.

Q: What do these marketing rules have to do with the JOBS Act, and why are they a part of it?

A: You have a couple things going on here. As people have been pointing out for a number of years, most of these securities laws were written in the 1930s, with the last one in 1940. The general nature of the industry has changed over the years; the JOBS Act is a reaction to some of the problems with these laws. Technological advances, and the ability of the internet to be a means of connecting with people in a way to market to potential investors - securities laws just do not address those issues. The JOBS Act was trying to find a way to balance investor protection of the securities laws with the ability for managers to go out and communicate and have a sort of certainty with respect to their activities on the internet.

Read the rest of the interview at MarketsReformWiki.com.

April 16, 2012: Managed Futures Make Tax Time a Little Easier; Investors wary of volatility after losses

noreply@blogger.com (Douglas Ashburn) — Wed, 18 Apr 2012 18:10:00 +0000

Observations - Statistics - Commentary

The center of the CTA/Managed Futures universe will be in New York this week. On Wednesday, the National Introducing Brokers Association holds its one-day sales and marketing conference. Thursday is the sold-out CTA Expo New York. Both events will be held at the NYMEX Building. John J. Lothian & Co. is an official media sponsor of the CTA Expo series, which includes the London Emerging Manager Forum in June, CTA Expo Chicago in September and, new this year, CTA Expo Miami in December. JLN Managed Futures will be providing periodic updates as they become available.

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CME Group/BarclayHedge Announce "Managed Futures Pinnacle Awards"
BarclayHedge
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.
http://jlne.ws/HCICqz
**JK - Once you reach the Pinnacle, however, where else do you go?

Gate 39 Media Launches Online Managed Futures Portfolio Management Tool—Clarity Portfolio Viewer
Press release
For futures brokers and FCMs, the Clarity Portfolio Viewer provides access to an individual investor’s performance as well as the firm’s managed futures investments. Brokers and FCMs can view the amount of funds they manage in both dollars and number of accounts, program allocations, sales information, and more.
http://jlne.ws/HCtjhJ
**JK - Having had a look at it, this is a very clean dashboard-type of tool that investors would appreciate and is a value-add for FCMs and IBs.

Managed Futures Make Tax Time a Little Easier
Attain Capital Management
While the average American detests this day, investors surveying their gains and losses often abhor the date even more as they compile statements to find their cost basis and take a look at the taxes they owe. However, the pain endured in the payment of taxes can differ greatly, depending on the kinds of investments you hold. Turns out, if you’ve invested in managed futures, you may be letting out a sigh of relief… unlike your stock investing counterparts.
http://jlne.ws/HHH4ue
**DA: The good-ol' 60/40 split. Thank you, Dan Rostenkowski.

Hedging the downside risk of your portfolio
TODAYonline
"Manage the downside and the upside will take care of itself" - so says Warren Buffett. This statement is important, notably in light of studies that show staying in the market - or spending time in the market - is more important than market timing. However, while staying invested, there will be periods of significant volatility and downside. Hence it is important to recognise it, understand why it is there and, most importantly, manage it.
http://jlne.ws/IyFIRG
**DA: The article, written by Standard Chartered's Jeffrey Ong, plugs CTA strategies as a way to manage volatility, protect against inflation, and diversify holdings.

Quote of the Day

“One of the problems of indexing is volatility. Holding the index and riding the volatility may breach risk management guidelines for some investors. So a pension fund, for instance, may sell the index when it falls by a certain amount, crystallise losses at the bottom of the market and buy in again at the top.”

Randall Dillard, chief investment officer of Liongate, a fund of hedge funds in FT's story: "Investors wary of volatility after losses."

Managed Futures Scorecard		4/16/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	-0.67%	-1.19%
Newedge CTA Trend Sub-Index	-0.92%	-0.64%
Newedge Trend Indicator	-2.32%	-3.64%
Newedge Short-Term Traders Index	0.15%	-2.16%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		-0.19%
Barclay UCITS Index		5.80%
Barclay Hedge Fund Index	0.18%	5.68%
BTOP FX Index	0.45%	0.94%
Morningstar Long/Short Com. Index	1.34%	3.63%

Lead Stories

Investors wary of volatility after losses
FT.com
Increasing demand by institutional investors for commodities exposure has been a feature of the investment landscape over the past decade. As well as the widely accepted commodities supercycle narrative, investors see the asset class as a way of reducing portfolio risk.
http://jlne.ws/HMA594
**That story, follows this one below...

New style commodity indices underperform
FT.com
"Second-generation” commodity indices, touted by bankers as a way to make extra money from the relatively new asset class, have failed to outperform the most basic investment products this year.
http://jlne.ws/HZRJTT
**And this...

Hedge funds cut commodity exposure to four-month low
HedgeCo.Net
Hedge funds and other money managers slashed their exposure to US commodities by around $9 billion this week, government data showed over the weekend, in the biggest such cut in four months on worries over China’s slowing economy and fading prospects for new US economic stimulus.
http://jlne.ws/Igovzz
**JK - And this.

Hedge Funds Take in $6.8 Billion in February, but Returns Still Lag S&P 500
BarclayHedge
Funds of Funds See Inflow Amid Disappointing Returns. Most Hedge Fund Managers Believe Fed will Raise Interest Rates Before 2014. Neutral Outlook on U.S. Stocks Rises Sharply. Bearishness on U.S. Treasuries Doubles "BarclayHedge and TrimTabs Investment Research reported today that hedge funds took in an estimated $6.8 billion in February, reversing a trend that saw more than $21.5 billion flow out of these funds in January 2012 and December 2011, the largest outflows since July 2009.
http://jlne.ws/IsqMsO
**DA: And, finally, this.

Commods funds face Q2 dilemma as recovery stutters
Reuters
Commodity managers who performed well in the first quarter with tilts to oil and industrial metals remain bullish going into the second quarter but are prepared for rapid repositioning given the uncertainty around China, Iran and strategic oil reserves.
http://jlne.ws/ISBoyB

Bill Gross's New ETF Roars Out of the Gate
WSJ.com
Bill Gross, the co-chief investment officer and founder of Pacific Investment Management Co., recently pulled off an unusual feat: He beat his own performance.
Mr. Gross's new actively managed exchange-traded fund, the Pimco Total Return ETF, returned 2.52% from its Feb. 29 launch through April 12, according to investment-research firm Morningstar MORN -0.03% .
http://jlne.ws/HMrtOC

Despite their rep, hedge funds disappoint
HedgeCo.Net
A truly amazing phenomenon is the continued popularity of hedge funds, especially among high net worth investors. Despite the historical evidence on their lousy performance (as presented in my book “The Quest for Alpha”), hedge funds continue to attract great attention.
http://jlne.ws/Igpv6E

April Hedge Fund Inflows Advance 0.35%
HedgeCo.Net
Hedge fund flows as measured by the GlobeOp Capital Movement Index advanced 0.35% in April.
Outflows tend to be seasonally higher at quarter ends as investors rebalance their portfolios,” said Hans Hufschmid, chief executive officer, GlobeOp Financial Services (LSE:GO.). “Despite this, net flows for April were slightly positive.” http://jlne.ws/IgnvLC

HedgeCo Networks Names Former UBS Managing Director Brett Langbert as President and COO
HedgeCo.Net
HedgeCo Networks (HedgeCo), the pioneering hedge fund database and advisory firm, today named Brett Langbert President and Chief Operating Officer. Langbert, who spent 17 years on Wall Street covering hedge funds across a multitude of sectors and strategies, was most recently a managing director at UBS, responsible for the firm’s prime brokerage sales for the Americas.
http://jlne.ws/IZLrWv

Managed Futures/Managed Funds

What Is Contango?
Seeking Alpha
When it comes to commodity investing and trading, contango is a dirty word. Many investors have given contango a bad name (and rightfully so) as it has the ability to destroy value in an underlying position with the blink of an eye. Now that the ETF universe has rapidly expanded and there are a number of complex products offering exposure to the commodity world, contango has become more prevalent than ever. A number of investors have fallen prey to this phenomenon often without realizing what it was and how it impacted their holdings.
http://jlne.ws/Jr5R5N

Hedge Fund People Moves: Man names Ravi Chari as new co-head of FX at AHL
HedgeCo.Net
Hedge Fund News "Hedge fund giant, Man Group has appointed Ravi Chari as co-Head of Foreign Exchange at London-based AHL, its systematic managed futures manager.
http://jlne.ws/Igl4IX

Opalesque Roundtable Series - Brazil 2012
Opalesque
After 2008 and 2010, this is the third Opalesque Roundtable we are publishing about Brazil. Coming back after two years, I was amazed how the markets and the financial industry have marched along and achieved true progress, to the benefit of all Brazilians and investors.
http://jlne.ws/HLulHf
**The roundtable includes: Mauricio Levi, Fama Investimentos , Otávio de Magalhães Coutinho Vieira, Fides Asset Management, Eduardo Moreira, Plural Capital, Mariano Andrade, Polo Capital Management, Marcia Rothschild, Citi and Vassilis Vergotis, Eurex.

Famed Investor Seeds New Fund
WSJ.com
Well-known investor Julian Robertson plans to put tens of millions of dollars into a global macro fund launched by Trient Asset Management, a firm co-founded by a former head of Norway's sovereign wealth fund, in a bet that the global economic rebound will fall short of investors' expectations.
http://jlne.ws/HHUQgo

Supply-side drives commodities again
FT.com
Is this the moment when commodity markets throw off the shackles of the macroeconomic outlook? For investors fretting about a Chinese slowdown, excited about the US recovery, or living in fear of a eurozone meltdown that may seem hard to imagine.
http://jlne.ws/HMb91o

United States Commodity Funds LLC Launches the United States Agriculture Index Fund (USAG)
The Business Journals
United States Commodity Funds LLC, a sponsor of exchange traded commodity funds, listed for trading on the New York Stock Exchange Arca, a new exchange traded commodity index fund, United States Agriculture Index Fund, under the ticker "USAG."
http://jlne.ws/HMJmfw
**DA: Fund to track the SummerHaven Dynamic Ag Index.

Investors wary of volatility after losses
FT.com
Increasing demand by institutional investors for commodities exposure has been a feature of the investment landscape over the past decade. As well as the widely accepted commodities supercycle narrative, investors see the asset class as a way of reducing portfolio risk.
http://jlne.ws/Ir9aeF

Citadel Soars to $115 Billion With Reporting Rule Change
HedgeCo.Net
Citadel, run by Ken Griffin out of Chicago, reported $115.2 billion of regulatory assets in a March 30 filing with the U.S. Securities and Exchange Commission, compared with $12.6 billion of net assets. Millennium, founded by Israel Englander, disclosed comparable figures of $119 billion and $13.5 billion as of year-end.
http://jlne.ws/J5WFac

Tiger Management backs Kjær for new fund
FT.com
Julian Robertson’s Tiger Management is to back a new hedge fund run by Knut Kjær, the former head of Norway’s sovereign wealth fund. Mr Kjær played a significant role in setting up Norges Bank Investment Management, which manages Norway’s pension fund and foreign exchange reserves, and ran the group until 2008.
http://jlne.ws/IOdbOO
**DA: An emerging manager's dream - to have one's first investor be someone like Julian Robertson.

Claymore Brings Managed Futures to Canadian Retail Investors
Financial Highway
In February, Claymore Investments announced the launch of the Claymore Managed Futures ETF. The fund is the first liquid, low-cost managed futures fund available to Canadian investors. We spoke to Som Seif, President and CEO of Claymore, about the fund and investing in futures.
http://jlne.ws/HOpNWl

Pensions & Institutions

Hymans Robertson dedicates research to managed futures and global macro
Hedge Fund Manager
Hymans Robertson, a leading UK investment consultancy firm, is focusing its attentions on managed futures and global macro strategies in the single manager hedge fund space, as investors increasingly consider a move away from the fund of hedge funds model, HFMWeek has learned.
http://jlne.ws/HZUq82

EDHEC: SWFs and Their Implicit Liabilities
AllAboutAlpha
A new survey by EDHEC-Risk Institute lets managers of the sovereign wealth funds – and those who manage other, related institutions such as central banks or state development funds – speak for themselves about the strategies SWFs pursue. The responsive state-affiliated investment managers, mostly from Middle Eastern and East Asian vehicles, say that they believe SWFs can benefit from a liability-driven investment model, but they worry about models that are too general, inadequately customized to their needs.
http://jlne.ws/HCF0op

Endowments Should Prepare for Risks of Deflation
AllAboutAlpha
Hedge Fund Trends & Alternative Investment Analysis "Mark Schimd, the chief investment officer at the University of Chicago, and Que Nguyen, managing director of strategy there, have written a wide-ranging paper that begins with the challenges at the University of Chicago’s fund and its commitments, but that has broad implications. Their paper is the result of an initiative begun in early 2010, known as Total Enterprise Asset Management (TEAM).
http://jlne.ws/HLa0GS
**DA: Not a certainty, but a scenario that should at least be looked at. From the study: "In a future with low or negative inflation and burdensome levels of debt, a 'lost decade,' the real cost of debt will increase, endowment returns may prove significantly below planned levels, and difficult cuts will have to be made."

Private equity megafunds are a washout for investors
Pensions & Investments
Private equity deals that generated the most excitement before the recession are coming back to haunt their investors' portfolios. Highflying buyout firms joined together in these “club deal” transactions between 2005 and 2008 to pick off companies up and down the Standard & Poor's 500 index. The plan was to take advantage of the growing economy and booming stock market to take public companies private, load them up with debt and sell them back to the market in a couple of years for tidy profits.
http://jlne.ws/HOnwqd

Regulation

Commodities funds under fire
InvestmentNews
The CFTC is cracking down on mutual funds that invest heavily in oil, natural gas and other commodities — and it could lead to higher costs for investors.
http://jlne.ws/HMRlsP
**DA: For more info, see the final rule summary on MarketsReformWiki

FSOC issues final rule on nonbanks new research looks at Dodd-Frank one year later
Bailey McCann, Opalesque
The Financial Stability Oversight Council (FSOC), has issued its final rule and guidance on how it will determine which nonbank financial companies pose a threat to the financial system what firms will be designated as "systemically important financial institutions" (SIFIs).
http://jlne.ws/ISwuSf
For more info, see the final rule summary on MarketsReformWiki.

Hedge Funds Pleased With Some Parts of Dodd-Frank, a Study Finds
NYTimes.com
The Dodd-Frank law is not exactly popular among financial services professionals, many of whom consider the new legislation too onerous and restrictive. But, at least according to a recent study, one segment of the industry is pleased with the new reality: hedge funds.
http://jlne.ws/J6pUGi

The Dodd-Frank Bill: Views From The Hedge Fund Industry
HedgeCo.Net
New hedge fund research has emerged from the Frank G. Zarb School of Business at Hofstra University in conjunction with hedge fund accounting and advisory firm EisnerAmper LLP., “The Dodd-Frank Bill – a Year and a Half Later: Views from the Hedge Fund Industry.”
http://jlne.ws/HMG79M
**JK - See the survey HERE.

Switzerland seeks to be on the same regulatory page as other top financial markets
Opalesque
The FT published an article this weekend claiming newly proposed financial regulations coming out of Switzerland would affect hedge fund managers negatively. The proposals were in fact issued in February by FINMA, the Swiss Financial Market Supervisory Authority. They are being looked into by various Swiss government bodies – and would put Switzerland on a similar regulatory page as that of other main financial centres.
http://jlne.ws/IGRNtu

Rosenthal Collins settles CFTC charges
Reuters
The Commodity Futures Trading Commission announced on Thursday a $2.5 million settlement with futures brokerage Rosenthal Collins Group (RCG) over its failure to detect a Ponzi scheme run by one of its customers. The CFTC said the brokerage failed to "diligently supervise" an account used for a multi-million-dollar commodity futures Ponzi scheme from 2006 to 2009.
http://jlne.ws/J6r7xt
**DA: According to the CFTC, “Even if an FCM does not knowingly assist in a Ponzi scheme conducted by an account holder, an FCM cannot ignore questionable transactions that stand out as red flags of fraudulent conduct, particularly when those flags should have been obvious under the FCM’s own policies and procedures.”

SEC Begins Big Dig Into Hedge Fund Data
WSJ.com
The top U.S. securities regulator has started to sift through a trove of new data on the nation's largest hedge funds and other private money managers to help identify firms whose behavior might pose the greatest risks to their investors. "Pick your fraud of the day and the question is, 'Can we extract information from this data system together with the other databases we have access to and home in on problems before they do damage?'" said Robert Plaze, deputy director in the division of investment management for the Securities and Exchange Commission.
http://jlne.ws/HKVeez
**DA: Article highlights the types of "revelations" that could be gotten by going through data with a fine-toothed comb. The bad news for the regulatory agencies is their budgets are already stretched thin by other Dodd-Frank requirements.

April 2, 2012 - The Future of Managed Futures; Hedge Fund Manager Pay Drops; A Fresh Look at Commodity Funds

noreply@blogger.com (Douglas Ashburn) — Mon, 02 Apr 2012 20:39:00 +0000

Observations - Statistics - Commentary

CTA Expo New York, April 19, 2012, NYMEX Building
CTA EXPO was created to help professional capital raisers and allocators identify futures trading talent and to promote investing in managed futures. In just over three years CTA EXPO has grown to offering one day conferences in New York, London, Chicago and Miami. Registrations have grown for our conference in Chicago from 140 in 2008 to 500 in 2011. View the program here:
http://jlne.ws/HfvlGl
**DA: CTA Expo NY has officially sold out. Frank and Bucky invite you to attend the London event June 28, Chicago on September 13, and, new this year, Miami on December 13.

Taking a Fresh Look at Equity Commodity Funds
Morningstar
Investors' interest in commodities has exploded over the past 10 years. Whether they're looking for diversification, an inflation hedge, or to speculate on rising prices, investors have plowed hundreds of billions of dollars into commodity-related offerings, both mutual funds and exchange-traded funds. A decade ago, commodity-related funds (at that time, only the open-end equity energy, precious metals, and natural resources categories existed) held just $10 billion in assets. Today, after gold has soared to $1,650 an ounce from $300 and oil has gone from less than $30 per barrel to north of $100, total assets in ETFs and open-end commodity-related funds hit an astonishing $320 billion in February.
http://jlne.ws/H9zSfd
**DA: "Three pipelines to commodity exposure" highlighted.

Quote of the Day

"Managed futures don’t work when there are no trends, or when the trends reverse really quickly, and that’s what happened last year …. Most managed-futures funds didn’t see a positive return in 2011 because trends reversed all of a sudden, in multiple asset classes.”

Morningstar’s Nadia Papagiannis in Marketwatch article "Managed-futures fund rides diversification trend."

Managed Futures Scorecard		4/2/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	-1.86%	-0.43%
Newedge CTA Trend Sub-Index	-2.18%	0.36%
Newedge Trend Indicator	-1.95%	-1.36%
Newedge Short-Term Traders Index	-1.00%	-2.19%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		0.96%
Barclay UCITS Index		6.50%
Barclay Hedge Fund Index	4.35%	10.07%
BTOP FX Index		0.68%
Morningstar Long/Short Com. Index	0.41%	2.26%

Lead Stories

The Future Of Managed Futures
FINalternatives
Managed futures as an asset class has long been touted for generating the holy grail of all investment strategies: uncorrelated returns. The professional money managers known as commodity trading advisors who make up this roughly 30-year-old industry invest long and short across a wide variety of markets, trading strategies and time periods. But while managed futures have performed well over the past decade, there have been significant differences between the returns of individual CTAs.
http://jlne.ws/HQgXkw
**DA: Good primer on the spectrum of managed futures offerings and differences among managers and strategies. Finishes with a "look ahead" for the industry.

Managed-futures fund rides diversification trend
MarketWatch
The recent financial and economic crises have undoubtedly left investors wary of the stock market, and funds like Altegris Managed Futures Strategy Fund (MFTAX) are taking advantage of the public's desire to hedge their bets. Alternatives firm Altegris Advisors launched its managed-futures mutual fund in August 2010, and it has already garnered $1.1 billion in assets. The six hedge-fund managers the fund uses dabble in stock-index, commodity, currency and interest-rate futures, diversifying their investments even within each asset class to minimize the volatility of the fund.
http://jlne.ws/HfMI5g
**DA: If you have not seen our recent video interview with Altegris, view it here:
http://jlne.ws/wtHElV

Hedge Funds Attract $3.25B In February
FINalternatives
Convertible arbitrage and managed futures strategies saw the largest asset inflows on a percentage basis in February, at 0.97% and 0.64%, respectively, from January 2012. Directional strategies, such as long/short equity, generated positive returns for the second month in a row. Managers noted that the market appeared to trade more on fundamentals as stock correlations declined and stock prices reacted in line with post earnings announcements.
http://jlne.ws/HFecoo
**DA: Preliminary March data does not look as good. See today's scorecard above.

New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight Into February Hedge Fund Performance
MarketWatch
Hedge funds, as measured by the Dow Jones Credit Suisse Hedge Fund Index, finished February up 1.61%; with 9 out of 10 strategies in positive territory. In total, the industry saw estimated inflows of approximately $3.25 billion in February, bringing overall assets under management for the industry to approximately $1.75 trillion; February experience the first month of asset inflows since August 2011;
http://jlne.ws/H95Hjc

Managed Futures/Managed Funds

Pay for Top-Earning U.S. Hedge Fund Managers Falls 35%, AR Says
Bloomberg
Compensation for the highest-paid U.S. hedge-fund managers plunged 35 percent in 2011 to $14.4 billion after the European sovereign debt crisis pushed the industry to its second-worst year ever, a survey showed.
Average pay for the 25 top earners was $576 million last year, down from $883 million in 2010, according to an annual ranking published by AR Magazine. In 2009, the figure stood at $1.1 billion.
http://jlne.ws/HD6oRg
**DA: No surprise: Ray Dalio tops the list; John Paulson falls off the list.

Morgan Stanley Brokerage Managed-Futures Funds Lose 9.5%
Businessweek
Five managed futures funds run by Morgan Stanley Smith Barney, the world’s largest retail brokerage, lost $79.1 million last year as only one was profitable and all faced customer withdrawals. Morgan Stanley Smith Barney Spectrum Select LP, the largest of the five funds by assets, lost $67.9 million and faced $55.2 million in redemptions in 2011, the firm said in a regulatory filing. The fund lost 17.9 percent per unit, according to the filing.
http://jlne.ws/HFrdvn
**DA: Ouch.

Speculators Add To Gold Positions, But Cut Other Metals --CFTC
Forbes
Managed-money accounts returned as buyers, lifting their net-long position to 130,472 contracts. Managed-money accounts added 12,035 gross longs and cut 5,154 gross shorts. Producers cut more gross longs than shorts, increasing their net-short position, while swap dealers cut gross longs and added gross shorts, upping their net-short position.
http://jlne.ws/HFeATK

U.S. Rejoins the Globe, Say Consultants
AllAboutAlpha
A new consultant survey forecasts that investors in the months to come will be looking for opportunities in hedge funds, funds of funds, and non-U.S. stocks, including equity in the emerging markets. The survey indicated, further, that there will be at least a short-term decline in demand for domestic equity and long-duration bonds.
http://jlne.ws/Hi8vd6

Hedge Funds Make Wrong-Way Bets for a Fourth Week: Commodities
Businessweek
Hedge funds wagered the wrong way on commodity prices for a fourth consecutive week, boosting bullish holdings just before reports showing a contraction in manufacturing from China to Europe drove prices lower.
http://jlne.ws/Hb4de8

AHL CEO sees opportunities for CTAs in emerging markets and complementary strategies
Hedge Funds Review
Tim Wong, AHL CEO, says CTAs should look at opportunities offered by emerging markets as long as they keep an eye on liquidity. He also suggests trend followers should look at complementary strategies. Markets such as Brazil, India and China offer commodity trading advisers (CTAs) investment opportunities, according to Tim Wong, CEO of Man AHL. However, traders need to be aware of liquidity constraints and have an exit plan in place in case liquidity dries up in these markets.
http://jlne.ws/HBHibx

Pensions & Institutions

Managed futures role in the institutional portfolio
Opalesque
Commonfund has released a new whitepaper entitled Understanding the Managed Futures Strategy and its Role in an Institutional Policy Portfolio. The authors, from Commonfund’s Hedge Fund Strategies Group, apply quantitative techniques to provide a better understanding of the strategy and the drivers of its returns. They also present historical evidence that supports the diversifying role of CTAs in institutional policy portfolios.
http://jlne.ws/H7Mp2d

Too Many Worries or Too Few for Pension Fund Sponsors
AllAboutAlpha
"Risk importance concentration” is a measure of the extent to which pension plan sponsors concentrate on a narrow range of risk items, rather than paying equal heed to every potential worry. A new study by MetLife, a global provider of annuities, employee benefits plans, and insurance, raises by implication the question whether an increase in concentration is, under present circumstances, good or bad. After all, it is the fox you aren’t watching that is stealing your hens.
http://jlne.ws/H9k22P

Mexico pension funds to diversify with commodities
MarketWatch
The ability of Mexican pension funds to invest in commodities is an important step in the market's development, as the funds' investments are highly concentrated in Mexico, a portfolio manager for one of the country's largest pension funds said Thursday. Recent regulatory changes will permit the funds, known as Afores, to invest between 5% and 10% of their portfolios in commodity-linked securities.
http://jlne.ws/H9dspa

Low Rates Put U.S. Company Pension Deficits at Record
Real Time Economics - WSJ
Paltry interest rates and lackluster returns on investments pushed deficits at U.S. public company pension plans to a record last year–$326.8 billion as of the end of 2011, or $94.7 billion more than year-end 2010–according to a study by consultancy Milliman. The plans’ shortfall–20 cents on every dollar owed to retirees–is the worst in the 12-year history of Milliman’s study and will have to be made up by companies either contributing extra cash or generating more income on their investment portfolios.
http://jlne.ws/Hb5jqt
**DA: The Law of Unintended Consequences is alive and well. The equity rally is built upon zero interest rates. The diversified portfolio will be hard pressed to hit return thresholds sufficient to meet payout demands.

Pension Funds Making Alternative Bets Struggle to Keep Up
NYTimes.com
Fees for the $242 billion in California’s giant state pension system, known as Calpers, nearly doubled, to more than $1 billion a year, after it increased its holdings in private assets and hedge funds to 26 percent of its total in 2010, from 16 percent in 2006. Calpers, which has earned 3.4 percent annually over the last five years, is pushing the managers of the funds for lower fees as well as reducing the number of outside managers it uses to try to bring costs down.
http://jlne.ws/HG9GTH
**DA: From the article: "Heads of pension funds across the country feel trapped. Lower-risk bonds, like 10-year Treasury notes with a yield of around 2 percent, simply will not fill the gaps many systems face between what they have and what they owe retirees."

The hunt for yield – fixed income panel
Professional Pensions
The panelists discuss if pension schemes should be upping their allocation to fixed income, the ramifications of the budget and the 100-year bond
http://jlne.ws/H9fhCE

Regulation

Jobs Bill Could Make Hedge Funds More Mainstream
HedgeFund Net
Could hedge funds show up in a future TV commercial? That may be possible when President Barack Obama is scheduled to sign the Jobs Act next month, according to the Wall Street Journal .
http://jlne.ws/H9WVlg

AIFMD developments leaves lobbyists "deflated"
Hedge Fund Manager
Europe’s regulatory hardliners look set to win out in the battle for the Alternative Investment Fund Managers Directive (AIFMD), with hedge fund industry lobbyists left “deflated” by the EU Commission’s decision earlier this week to reinsert many of the document’s stricter provisions, Brussels sources have said.
http://jlne.ws/H4Fsf3
**DA: At issue are the stricter calculations of AUM and leverage, and increased liability at the depository level. Once again, it is the U.K against continental Europe. According to UK MEP Syed Samall, "The meeting was conducted almost entirely in French, with no English interpretation provided." Read on:

Hedge fund fury at Brussels directive
Telegraph
They are irate that hard-won compromises over the contentious Alternative Investment Fund Managers Directive appear to have been ditched by the EC, potentially damaging their business and preventing US and Asian fund managers accessing European investors.
http://jlne.ws/HQtULb
**DA: from the article: UK and Netherlands see it as "a massive power grab" by the EC.

Dodd-Frank takes its toll on the buy-side
thetradenews.com
It was a banner week for the Commodity Futures Trading Commission (CFTC) last week with another three rules passed in its long journey towards total implementation of the weighty Dodd–Frank Act. Of chief importance to the buy-side, the CFTC adopted new rules preventing dealers and their clients using a controversial standardised clearing system proposed last June by the International Swaps and Derivatives Association (ISDA) and the Futures Industry Association (FIA)
http://jlne.ws/Hg9Gt9
**DA: For more on CFTC rulemakings, visit MarketsReformWiki

Mary McHenry of the National Futures Association Discusses the NFA’s CTA Marketing Policies

noreply@blogger.com (Ryan Lothian) — Mon, 02 Apr 2012 17:38:00 +0000

Mary McHenry is senior manager of compliance at the National Futures Association (NFA). Among the NFA’s oversight responsibilities is the monitoring of the marketing and promotional activities by commodity trading advisors (CTAs). John Lothian News Editor-in-Chief Jim Kharouf spoke with McHenry about CTA promotional materials, some common mistakes made by CTAs with regard to the use of performance statistics, appropriate use of social media, and the NFA’s pre-review program.

JLN Managed Futures - March 15, 2012

noreply@blogger.com (Nicole V. Rohr) — Thu, 15 Mar 2012 18:43:00 +0000

Observations - Statistics - Commentary

The JLN Managed Futures team is in Boca Raton, FL this week for the FIA International Futures Industry Conference. As expected, there were three key topics that consumed a majority of conversation, from panels to "table talk":

The retirement of John Damgard after 30 years as president of the FIA. He has been a tireless promoter of the futures industry whose presence will be sorely missed. John turns the reins over to former CFTC chairman Walt Lukken, who brings his decades of industry and regulatory experience at this critical time for the futures industry.
The aftermath of the MF Global bankruptcy. There was a panel devoted to clearing member defaults and another on customer protections. It is clear that regulators, industry leaders and customer representatives all want the same things - for the customers be made whole and for protections be put in place so we do not see a repeat of this type of debacle.
The Dodd-Frank rules are becoming finalized, and the implementation time is fast approaching. Not everyone is ready.

http://jlne.ws/AC5l52

Mark Esposito of OneChicago Discusses Their NoDivRisk ("1D") Single Stock Futures

MarketsWiki.tv

Mark Esposito, a 25-year trading veteran on the floor of the Chicago Board Options Exchange (CBOE), is the managing director, business development at OneChicago. John Lothian News Editor-at-Large Doug Ashburn spoke with Esposito about OneChicago’s NoDivRisk (“1D”) Single Stock Futures products and how commodity trading advisors and managed futures funds can use them.

http://jlne.ws/zTyZis

Quote of the Day:

“Following the choppy markets in 2011, we have seen a noticeable shift in performance this year, pointing towards the trending market environment which is more suited to CTAs and managed futures players."

-Pauline Modjeski, President of Horizon Cash Management

Lead Stories

MF Global Clients’ Details Published
Financial Times
Private clients of MF Global reacted angrily on Wednesday to what several said was a severe breach of privacy, after KPMG, administrator to the UK arm of the failed futures broker, published their identities, home addresses and the sums owed to them.
http://jlne.ws/A6yUJ0

**DA: Another one for the "adding insult to injury" files.

Will MF Global haunt CME in 2012?
By Elizabeth Dexheimer, Medill Reports
It’s been four months since MF Global Holdings Ltd. filed for bankruptcy, but how long will the fallout continue to impact CME Group Inc.? It's still too soon to tell, according to some industry experts.
http://jlne.ws/xY6ndj

Investment niche expands in agricultural commods
Reuters
Prospects for profits tied to increasing food production are driving a proliferation of new niche investment vehicles focused on agriculture. Agricultural commodities exchange traded funds (ETF) are on the rise, with 11 new funds added last year alone.
http://jlne.ws/wlxnxg

Investing in Commodities with ETFs: A basic guide to investing in commodities using ETFs
As an individual investor, you may be interested in investing in commodities to diversify your portfolio. Investing in tangible assets such as oil, gold, silver, corn, and soybeans can offer diversification benefits. Commodities can also provide some protection from inflation. But how do you invest in this market?
http://jlne.ws/zPOmSj

**DA: Helpful guide from Morningstar to help those seeking passive investment in commodities. Scroll down to the regulatory section to see CFTC Commissioner Chilton's desire to curtail such investment.

Asked and Answered: Commodities and Alternatives ETFs Minus the Tax Headache
Financial Planning
ETFs have seen rapid adoption by investors and advisors in recent years, but while the products themselves are known for their liquidity and transparency, what’s less understood is the tax bite some may deliver at the end of each year. With this in mind, Financial Planning spoke with Adam Patti, CEO of IndexIQ, to talk taxes and ETFs.
http://jlne.ws/w5iGN5

Managed Futures/Managed Funds

Highlighting 10 Successful Active ETFs Not Named TRXT
ETF Database
The debut of PIMCO’s highly-anticipated Total Return ETF (TRXT) earlier this month has been hailed as a pivotal moment for the active ETF industry, potentially opening up the floodgates to significant future inflows. There seems to be an opinion that the active ETF movement has been something of a failure to date, failing to bring in significant amounts of assets and gain much in the way of traction. The momentum has certainly been lacking for equities; the dozen or so actively managed stock ETFs have little to show in terms of AUM. But in other asset classes such as fixed income and alternatives, a number of active ETFs have taken off and accumulated in excess of $100 million.
http://jlne.ws/ApPnhH

**DA: Wisdom Tree Managed Futures Fund listed as number 6, with AUM of $246 million.

Hedge Funds Trim Bullish Commodity Bets
Bloomberg
Hedge funds reduced bets on higher commodity prices for the first time in seven weeks after China cut its growth target, just as prices rallied on signs the U.S. economy is improving and Greece is containing its debt crisis. Money managers reduced combined bullish positions across 18 U.S. futures and options by 1.1 percent to 1.17 million contracts in the week ended March 6, Commodity Futures Trading Commission data show. Investors cut bets on copper by the most in two months and those on oil by the most since December. China uses more copper and energy than any other nation.
http://jlne.ws/xakHDy

CFTC PRECIOUS METALS: Funds Grow Bearish On Precious Metals
WSJ.com
Managed funds slashed their holdings of Comex gold and silver futures and options in the week ended March 6, according to data released Friday by the Commodity Futures Trading Commission. Money managers sold 48,118 long positions, or bets prices will rise, and added 3,437 short positions, or bets prices will fall. This is the first time in three weeks that traders in this category reduced their bullish bets on gold.
http://jlne.ws/zSGZRh

Man launches actively-managed global commodities fund
Citywire
Man Group has launched its first single manager, commodities-only fund aimed at enabling investors to achieve greater diversity in their portfolios. The Man Commodities Fund has been developed by Man Systematic Strategies, an arm of the investment firm formed in January last year, and was launched with $50 million of seed assets.
http://jlne.ws/yq4but

Forward Launches Managed Futures Fund
MarketWatch
Forward Management, LLC ("Forward") today announced the launch of the Forward Managed Futures Strategy Fund (FUTRX), a mutual fund designed to generate positive returns in varied market environments while maintaining low correlations to major stock, bond, and commodity indexes. The Forward Managed Futures Strategy Fund harnesses a systematic, trend-following approach that provides both long and short exposure to liquid futures contracts in four global asset classes--commodities, equities, bonds and currencies.
http://jlne.ws/wphftx

**DA: Check out the risk disclosure at the end of the article. It is substantially longer than the press release.

Actively Managed Funds Have Time
By Lubos Pastor, Bloomberg
It has been another disappointing year for investors in actively managed funds. In 2011, about 79 percent of large-cap mutual fund managers trailed the Standard & Poor’s 500 Index (SPX), according to Morningstar Inc. The average equity mutual fund lost almost 3 percent last year, compared with a 2 percent gain for the S&P 500, says Lipper U.S. Fund Flows. Hedge funds fared even worse, with an average loss of 5 percent, according to Hedge Fund Research Inc.
http://jlne.ws/A2QzIe

**DA: This is a story from the equity world, but the study is applicable to managed futures as well. The opposite of Lake Wobegon: 80 percent of investors are below average.

Great Lakes Fund Solutions, Inc. is acquired and re-branded Marcal Systems Corporation
Opalesque
Great Lakes Fund Solutions, Inc. (GLFSI or the Company) today announces its new name and management following the sale of Marcal Systems Corporation to Mark Lancaster, the Company’s new President. http://jlne.ws/yMkaIP

Hedge Fund Study: Improved Environment for Managed Futures and CTAs
HedgeCo.Net
Two prominent CTA indices have published positive year-to-date returns for managed futures funds, highlighting a promising start to the year for this sector. The BarclayHedge CTA Index, a leading hedge fund benchmark of representative performance of commodity trading advisors is up 0.85% for 2012 and the Newedge CTA index, designed to track the largest CTAs and be representative of the managed futures space is up 0.93% for the same period.
http://jlne.ws/z4Ej39

Managed Futures Scorecard		2/28/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	0.19%	1.65%
Newedge CTA Trend Sub-Index	.85%	3.46%
Newedge Trend Indicator	-2.99%	-2.41%
Newedge Short-Term Traders Index	-0.08%	-1.28%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		1.10%
Barclay UCITS Index		5.86%
Barclay Hedge Fund Index	2.36%	5.53%
BTOP FX Index		1.63%
Morningstar Long/Short Com. Index	1.43%	3.31%

Pensions & Institutions

Tale of Trouble at Japan Pension Funds
Wall Street Journal
A scandal involving the alleged disappearance of billions of dollars in pension-fund money is highlighting an uncomfortable truth here. Most of the pension plans set up by groups of small businesses in Japan are under water, the latest data from the health ministry shows, even as the burden of future payouts grows in step with the aging of the country's population. Last month, Japanese financial regulators alleged that most of the roughly ¥200 billion ($2.4 billion) in funds overseen by AIJ Investment Advisors Co.—an asset manager that specialized in handling such small-business pensions—was missing. Regulators are still investigating.
http://jlne.ws/zcNAQv

Pension schemes grapple with alternatives
Financial News
The world’s seven biggest pensions markets – the UK ranks third – quadrupled their allocations to property, hedge funds and private equity in the decade between 2001 and last year. But almost all the action has been to do with defined benefit schemes, where a sponsor underwrites the pensions benefits.
http://jlne.ws/xK72HB

Steven Greenhut: Would you trust this bunch with your pension?
Orange County Register
Proposed new pension system is a metaphor for how California is run – for the benefit of the government class, which occasionally throws a few crumbs to the rest of us when we get a little unruly.
http://jlne.ws/y2Fah9

Move to electronic trading will increase hedge fund use of futures
Hedge Funds Review
Increasing use of algorithms among US hedge funds and other buy-side institutions will spur more futures trading, according to research* by capital markets advisory and research company Tabb.Competition among buy-side firms will prompt institutions to refine their execution strategies to include automated trading tools, says the report, which looks at predictions for the market over the next 12 months.
http://jlne.ws/y9oMUd

Regulation

US to pursue customer fund protection
By Hal Weitzman, Financial Times
The US Congress will propose legislation to strengthen the protection of customer funds in a bankruptcy of a futures broker, according to a Washington regulator. “There will definitely be statutory changes in regards to customer protection,” said Jill Sommers, a commissioner at the Commodity Futures Trading Commission, the US futures watchdog.
http://jlne.ws/AyhsGh

**DA One of the more interesting panels I attended yesterday. Change is coming, but nobody knows what, when, or how.

Hedge Fund Scammer Gets 11-Year Sentence
eVestment|HFN
A New Jersey resident who ran a fake hedge fund was sentenced Friday to 11 years in prison. New Jersey U.S. Attorney Paul Fishman announced that Robert Sucarato, 42, of Holmdel, N.J., was also sentenced to three years supervised release and ordered to pay over $1.1 million in restitution by U.S. District Judge Renée Marie Bumb.
http://jlne.ws/AeZCTr

**DA: We don't normally profile such fraudsters, but this one is quite a whopper - $7.2 billion in supposed AUM, net worth $798 million, faked documents from a Big 4 auditor, and lies about his education and professional credentials. Reminds me of Tommy Flanagan, John Lovitz' pathological liar character from '80s SNL."I run a hedge fund, and I've got...7 billion dollars in it. And I have a Ph.D. in astrophysics. Yeah, that's the ticket."

"Please Listen Carefully, Some Menu Options Have Changed" "
Speech of Commissioner Bart Chilton, Trade Tech 2012, New York, NY March 8, 2012
http://jlne.ws/xLH4Pb

**DA: Commissioner Chilton complains about "Massive Passives" - commodity investors, hedge funds, managed funds, pensions, etc. Blames passive investment for high commodity prices.

Goldman Sachs to Pay $7 Million Over CFTC Trading-Account Claims
Bloomberg
Goldman Sachs Group Inc. (GS) agreed to pay $7 million to resolve regulatory claims it failed to properly supervise commodities trading accounts, the U.S. Commodity Futures Trading Commission said. The regulator accused the New York-based firm’s Goldman Sachs Execution & Clearing LP unit of failing to supervise subaccounts managed from 2007 to 2009 by a broker-dealer that had engaged in “questionable conduct,” the CFTC said in a statement today. Goldman Sachs agreed to disgorge $1.5 million in fees and commissions it had collected from the broker and pay a $5.5 million civil penalty, the agency said.
http://jlne.ws/xY4cHV

Mark Esposito of OneChicago Discusses Their NoDivRisk (“1D”) Single Stock Futures

noreply@blogger.com (Ryan Lothian) — Wed, 14 Mar 2012 16:16:00 +0000

Max Eagye - Altegris [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Thu, 01 Mar 2012 15:58:00 +0000

Max Eagye is a director of Altegris Clearing Solutions, a San Diego-based introducing broker specializing segregated managed account services for institutional clients, family offices, commodity pools, hedge funds and mutual funds. John Lothian News Editor-at-Large Doug Ashburn spoke with Eagye about the Altegris family of affiliated companies, ManagedFutures.com, and emerging issues and trends in the managed futures space.

Disclaimer: Altegris Clearing Solutions, a registered introducing broker and CTA, and NFA member, introduces customer accounts to futures commission merchants, recommends a platform of futures trading programs and provides futures consulting services. Altegris Clearing Solutions and its affiliates (the Altegris Companies) are wholly owned subsidiaries of Genworth Financial, Inc. (NYSE: GNW). The Altegris Companies have a financial interest in the products they sponsor, advise and/or recommend, as applicable. Depending on the investment, the Altegris Companies and their affiliates and employees may receive sales commissions, a portion of management or incentive fees, investment advisory fees, 12b-1 fees or similar payment for distribution, a portion of commodity futures trading commissions, margin interest and other futures-related fee revenue, and/or advisory consulting fees. Futures and options trading involve risk. Past results are no indication of future performance.

Managed Futures Newsletter, March 1, 2012

noreply@blogger.com (Douglas Ashburn) — Thu, 01 Mar 2012 15:01:00 +0000

CTA Expo New York, April 19, 2012, NYMEX Building
CTA EXPO was created to help professional capital raisers and allocators identify futures trading talent and to promote investing in managed futures. In just over three years CTA EXPO has grown to offering one day conferences in New York, London, Chicago and Miami. Registrations have grown for our conference in Chicago from 140 in 2008 to 500 in 2011.
http://jlne.ws/zc1HxN
**Note from Bucky this morning - Two keynote speakers: Chuck Johnson, CEO of Tano Capital, a family office of one of the families in the Forbes 400; Dr. Bob Swarup, alternatives manager at an $8 billion pension fund and aspiring author. "We currently have 310 registered, including 53 CTAs, and expect to sell out by mid-March."

Quote of the Day

“Growth in developed markets is likely to remain low in 2012, but we are positive on the outlook for Asia, which is supported by stronger fundamentals, particularly for China.”

Joanna Munro, Hong Kong–based CEO for Asia-Pacific at HSBC Global Asset Management in Institutional Investor's article "Asset Management on the Rise in Hong Kong."

Lead Stories

U.S. futures players at odds on post-MF Global path
Reuters
Four months after $1.6 billion in customer funds went missing in the collapse of futures brokerage MF Global, industry participants are full of ideas for how to prevent a similar debacle going forward. They are far from agreed on which are the best. About two dozen regulators, exchanges, brokers, money managers, dealers, and academics took part Wednesday in an open meeting at the Commodity Futures Trading Commission on ways to beef up protection of customer collateral.
http://jlne.ws/zI5Rgw
**DA: Panelists at the roundtable include our own John Lothian. To see more ideas from industry participants, and to cast your vote on submitted ideas, visit our FuturesCrowd site

Deutsche Bank Hedge Fund Survey Predicts Growth And Increased Institutional Participation
HedgeCo.Net
Institutions now account for approximately two thirds of hedge fund assets compared to less than one fifth in 2003. Investors also predict continued growth, with an estimated net inflow of $140bn in 2012, taking industry AUM to an all time high of $2.26tn by year end.
http://jlne.ws/xthlMX
**JK - BarclayHedge reports that Q4 2011 AUM for Managed Futures totaled $314.6 billion, down from $320.3 billion in Q3 2011.

Survey: Funds Need To Do More To Attract Capital
eVestment|HFN
The fifth annual SEI report, “The New Dynamics of Hedge Fund Competitiveness,” found that the percentage of investors who listed a fund’s performance as the most important factor doubled from 2009.
Also noted is that while transparency at hedge funds has increased, the majority of investors still list that factor as a top worry and would like to see more improvement in that area.
http://jlne.ws/wY5Fmu
**It's survey day at JLN Managed Futures. Here's the SEI Report: The New Dynamics of Hedge Fund Competitiveness.

Global hedge launches outpace liquidations for second year running, says report
Hedgeweek
Global hedge funds’ assets totalled USD1,902 billion at the end of 2011 according to TheCityUK’s report Hedge Funds 2012. Although a 3% reduction from the previous year, it follows two successive years of growth that have seen assets increase by around a quarter.
http://jlne.ws/AD7kyF

Hedge fund, CTA and private equity investors to increase allocations in 2012
Hedgeweek
A total of 65 per cent of investment managers and investors surveyed said they intend to increase their allocations to private investments by some degree this year, with 25 per cent of participants planning to raise their allocations significantly. Further, 35 per cent intend to leave their existing allocations unchanged.
http://jlne.ws/zZevRf

John Paulson: Gold Fund Will Top Other Strategies
Newsmax Media
John Paulson, the hedge fund manager seeking to rebound from record losses in 2011, told investors his Gold Fund will outperform his other strategies over five years, according to a person with knowledge of the matter. The billionaire, at a meeting Friday at the Metropolitan Club in New York, said the metal is the best hedge against currency debasement as countries inject money into their economies, said the person, who attended the event and asked not to be named because the information is private. Paulson also cited gold as a hedge against the euro currency, as a breakup may occur, and an eventual increase in inflation.
http://jlne.ws/ydo0cg
**DA: Two days ago, I flagged this story for inclusion in the newsletter. Yesterday gold dropped almost $100/oz. Paulson made a name for himself several years ago due to his impeccable timing in shorting the housing market.

Man results in line with January trading statement
Hedgeweek
Man has reported statutory profit before tax from continuing operations of USD193 million for the nine months ended 31 December 2011 (12 months ended 31 March 2011: USD324 million), which is in line with estimates reported in the group’s 18 January trading statement.
http://jlne.ws/A4cujg
**JK - Man reported $59.5 billion in AUM at the end of February.

Pension Pain Mounts, Low Rates Boost Liabilities
Businessweek
Companies from defense contractor Lockheed Martin Corp. (LMT) to aviation-electronics maker Honeywell International Inc. are caught in a vise: the Federal Reserve Board’s vow to keep rates at current levels until 2014 means pension plans’ fixed-income investments are stagnating just as new rules shorten the time available to shore up funding.
http://jlne.ws/xv2eL1
**JK - If ever there were an opportunity for pensions and alternative investments, this is it.

Bridgewater's flagship up 36 in 2011 ranks number one in LCH list; managers expects dramatic 2012
Ray Dalio - Opalesque
Bridgewater's Pure Alpha fund, the world's biggest hedge fund with around $72bn in AuM, returned 0.9% (gross of fees) in the fourth quarter (Q4) of 2011, bringing the performance for the year to 36.4%, according to documentation obtained by Opalesque. The Strategy has annualised 22.2% since December 1991, and the fund has annualised 20% since its May 2005 inception.
http://jlne.ws/yf4Oc9

Managed Futures, Managed Expectations
Opalesque
According to Morningstar, the amount of assets plowed into funds that employ managed futures strategies zoomed roughly 240% last year, to $3.4 billion. There are now 26 funds in this category, with half of them coming on board since the start of 2011.
http://jlne.ws/zesIsJ

Steve Cohen Hedges with New York Mets Investment
Institutional Investor
SAC Capital’s Steve Cohen has become the latest member of the alternative-investments community to invest in a professional sports team after last week’s $20 million investment in the struggling New York Mets. For Cohen, however, this is something of a hedge.
http://jlne.ws/w5A6K0
**JK - Just because John Henry did it...

Asset Management on the Rise in Hong Kong
Institutional Investor
The number of money management firms in the city had risen to 798 at the end of 2010 from 580 three years earlier. Total assets increased more modestly, to HK$10 trillion ($1.3 trillion) from HK$9.6 trillion, but that occurred against a backdrop of weak markets that saw the MSCI Asia APEX 50 Index drop more than 11 percent during that period. The industry’s growth put Hong Kong well above rival Singapore and made the city the largest fund management center in Asia outside of Japan.
http://jlne.ws/wTzHiA

SunGard launches Hedge360
Hedgeweek
SunGard has launched Hedge360, an integrated, hosted service that supports the complete investment lifecycle for hedge funds and alternative asset management firms, from portfolio management to risk management, portfolio accounting and reporting with dedicated coverage of convertible arbitrage strategies and independent valuation.
http://jlne.ws/ySyVdb

Managed Futures/Managed Funds

Managed futures' performance fees lurk in loophole
InvestmentNews
Mutual funds aren't allowed to charge hedge-fund-style performance fees, but some managed-futures funds are taking advantage of a loophole. Because managed-futures funds that use multiple hedge fund managers do so through offshore entities, those entities aren't technically considered “subadvisers” and, therefore, are able to charge performance-based fees. In some cases, they may run as high as 35% of the managers' profits during any year.
http://jlne.ws/xlFM8a
*DA: In a discretionary trading strategy, manager skill is everything, so the manager must be compensated accordingly. In the mutual fund world, deducting performance fees from NAV is a big "no-no." When the CPO/CTA registration rules finalized by the CFTC this month goes through, this problem should go away. See the regulatory section for more information.

Goldman Adds to the Managed-Futures Rush
Focus on Funds - Barrons.com
Goldman Sachs’ (GS) asset-management arm is giving yet another sign that big money managers think that small time investors will cotton to highly quantitative, hedge fund-like “alternative” strategies. But investors should always be wary of chasing performance, and the managed-futures niche that’s the focus of this effort has had its share of chasers.
http://jlne.ws/ytFsdG
**DA: I prefer it straight, with no chaser.

Nick Sketch: why wealth managers got hedge funds so wrong
Citywire A few years ago, many of us invested in hedge funds via funds of hedge funds. The better examples generally offered a better risk-return trade-off than pure equity investment, while offering likely returns ahead of bonds. However, most had some net exposure to equity markets. Even without the discount swings that many investment trusts in the sector suffered (or the severe problems caused to some by illiquidity in their underlying assets), this feature made funds of this type less than ideal diversifying assets for an equity-based portfolio (and much less good in extreme circumstances than many of us expected).
http://jlne.ws/yEXBLc
*DA: The article cites CTAs/managed futures as the exception.

2011 New Hedge Fund Study
Seward & Kissel LLP
About 50% of the funds included in the study involved an equity or equity-related strategy (not including multi-strategy offerings which generally involved both equity-related as well as other strategies). About 1/3 of the
equity/equity-related offerings were focused on U.S. equities, while the rest had a global focus.
About 1/4 of the equity/equity-related strategies had a sector focus, with the most popular focuses being healthcare and financial services. About 20% of the funds included in the study were multi-strategy offerings, approximately 10% were credit or credit-related strategies, and the balance consisted of structured products, managed futures, commodities and miscellaneous other strategies.
http://jlne.ws/xLKGIE

UBP to Acquire Hedge Fund Manager Nexar Capital Group
HedgeCo.Net
Union Bancaire Privee, UBP SA, one of the leaders in Switzerland’s hedge fund industry, has signed a definitive agreement to acquire Nexar Capital Group, a global alternative investment manager.
http://jlne.ws/wqVMFg

Why CitiGroup Hid Its Hedge Fund Numbers
HedgeCo.Net
This coming April issue of Bloomberg Markets magazine reports that four of Citi’s seven biggest hedge funds have underperformed their indexes since they started, according to investors. Five of the seven lost money in 2011.
http://jlne.ws/wLXSEK

Managed Futures Scorecard		2/28/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	1.04%	1.63%
Newedge CTA Trend Sub-Index	1.85%	2.92%
Newedge Trend Indicator	2.4%	0.61%
Newedge Short-Term Traders Index	-0.83%	-1.07%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		0.18%
Barclay UCITS Index		7.3%
Barclay Hedge Fund Index		6.33%
BTOP FX Index	1.68%	0.99%
Morningstar Long/Short Com. Index	1.47%	1.73%

Pensions & Institutions

Texas Teacher fund moving into directional hedge funds
Pensions & Investments
Texas Teacher Retirement System, Austin, is in the process of building out a new 5% allocation — $5.5 billion in current dollars — to directional hedge funds to bring the $109 billion fund up to its 9% hedge fund target. Last year, the state Legislature approved an increase in the $109 billion system's hedge fund cap to 10% from 5%.
http://jlne.ws/xMAany
**DA: We reported last month on the increased allocation.

Georgia Senate passes bill allowing state pension funds to invest in alternatives
Pensions & Investments
The Georgia State Senate on Thursday passed legislation to allow most of the state’s public pension funds, including the $13.8 billion Georgia Employees’ Retirement System, Atlanta, to invest in alternatives.
http://jlne.ws/xBUR7A
**DA: Diversifying portfolios or reaching for yield? Maybe a bit of both. See story below.

Pension Tension: Political Sparks Highlight Challenges Ahead for Retirement System
Free Times (Columbia, SC)
Roughly 20 state and municipal employees gathered in the lobby of the State House on Feb. 22 to press lawmakers on an issue that, to them, matters more than almost anything in the world — whether, when their day to retire comes, they can count on the arrival of their pension checks, and whether those checks might be smaller or come later than they’d planned.
http://jlne.ws/wGipA9
**DA: Article highlights $13.4 billion funding gap over next 30 years. For a $25 billion plan, that is a significant shortfall. Alternatives the saving grace?

Private equity? You mean alternative asset manager
Reuters
Bosses of some of the world's largest private equity groups told the industry's annual get-together that their growth into alternative asset managers, investing in everything from credit to real estate, was necessary for their investors to beat the economic cycle. Private equity, one of the alternative asset classes offering diversification from stocks and bonds, has traditionally been about leveraged buyouts - where the buyer funds the purchase price through borrowing, using the target company's assets as collateral.
http://jlne.ws/yjFoxS
**DA: Tighter financing, Volcker Rule among the "game-changers."

Hedge-Fund Assets To Rise To Record $2.26 Trillion - Deutsche Bank
Fox Business
Hedge-fund assets look set to surge to a record $2.26 trillion by the year's end as investors increase their alternative investments and trim cash holdings. That is according to Deutsche Bank AG's latest alternative-investment survey, which interviewed about 400 investor entities worldwide--like pensions, foundations and endowments--representing more than two-thirds of the industry's $2 trillion in assets as at the end of 2011.
http://jlne.ws/AeDyB5
**DA: Not a bad haul considering the sector's returns were down 5 percent last year.

Ford’s Novel Way of Paying Pensions
Last week Ford (F) announced plans to shift their pension fund even more heavily towards bonds. At a time when interest rates are ruinously low and equities should appear attractively priced to a long-term investor such as a pension fund this represents quite a radical move.
http://jlne.ws/xhca41
**DA: I think Ford is saying, "Why overweight equities? As the stock market rises, so does Ford's balance sheet." Interesting read.

FSA in £20bn crackdown on 'pensions transfers'
eFinancial News
The Financial Services Authority is the latest UK body to come out against "pensions transfer" deals, which offer to swap workers' defined benefit entitlements for a one-off lump sum. It has set out a crackdown that it reckons will cost business - and save workers - £20bn.
http://jlne.ws/wkqwDc

Regulation

CFTC Final Rule: Registration and Compliance Obligations for Commodity Pool Operators and Commodity Trading Advisors
MarketsReformWiki
On February 9, 2012, the CFTC published its final rule on compliance obligations for commodity pool operators (CPOs) and commodity trading advisors (CTAs). CPOs and CTAs that are registered with both the CFTC and SEC ("dual registrants") will be required to file reports to the SEC similar to Form PF, the systemic risk reporting requirement, mandated by the Dodd-Frank Act, and to be used by the Financial Stability Oversight Council. Mutual funds that use futures and swaps tied to commodities will be required to register with the CFTC, just as they had been prior to the granting of the exemption by executive order in 2003. The National Futures Association (NFA) sought the change to improve protection of retail investors
http://jlne.ws/wNQp7I
**DA: This rule, plus the proposed rule below, should clear the air considerably on managed futures funds.

CFTC Proposed Rule: Harmonization of Compliance Obligations for Registered Investment Companies Required to Register as Commodity Pool Operators
MarketsReformWiki
On February 9, 2012, the CFTC unanimously approved a proposed rulemaking regarding certain compliance obligations for commodity pool operators who register with the SEC under the Investment Act of 1940. Under the rule, the CPO of any pool whose units of participation will be offered and sold pursuant to an effective registration statement under the Securities Act of 1933 (for example a commodity-linked mutual fund) may claim the relief from certain requirements.
http://jlne.ws/znv1Bf

Regulators likely to delay start date of Volcker rule
FT.com
US bank regulators will probably delay implementation of the so-called “Volcker rule”, a small victory for bankers who have objected to a provision that will most likely crimp their trading profits.
http://jlne.ws/AlLeqG

Managed Futures Newsletter, February 14, 2012

noreply@blogger.com (Douglas Ashburn) — Wed, 15 Feb 2012 15:56:00 +0000

Observations - Statistics - Commentary

CTA EXPO New York, April 19, 2012 CTA EXPO in New York provides CTA’s and professional asset managers the opportunity to network with capital raisers and allocators looking to identify trading talent. The EXPO also offers sessions on how managers can grow their business and how allocators can more effectively manage their portfolios. This is the 8th conference organized by CTAEXPO LLC and the third one in New York. All previous events have been sold out and anticipate a repeat in New York.
http://jlne.ws/yvUzxk
**DA: Note from Frank and Bucky: Already 60% of spots reserved; should sell out soon. Register by March 26 in order to be listed in the directory.

AlphaMetrix Survey: Majority of Investors in Hedge Funds, CTAs and Private Equity Plan to Increase Allocations in 2012
MarketWatch
AlphaMetrix LLC, founder and operator of the AlphaMetrix Global Marketplace (AGM), the leading secure online marketplace for private investments, today released results of a survey that found a majority of investors in hedge funds, commodity trading advisors and private equity funds expect to increase their allocations to those private investments in 2012.
http://jlne.ws/ABcgs9

What Were They Thinking? From MF Global to Raj & Bernie to LTCM
AllAboutAlpha
As investigators continue their search through the ashes of yet another billion-dollar bonfire and as the CFTC calls for still another regulatory revamp, we find ourselves asking the virtually perennial question: “What were they thinking?” Given that about the best we ever come up with is “greed,” could it be that as the parades of trades gone wrong marches on, it’s time to ask a different question, or maybe two questions.
http://jlne.ws/zRKQxq

Lead Stories

Attain Capital's Semi-Annual CTA Rankings
Attain Capital Management
It’s that time of year again, when we have the data for all of the CTAs we track through the end of 2011, allowing us to try and answer the question we get on a daily basis: What’s your BEST managed futures program? That question is always a tricky one, as depending on who is asking it, they may want to know any one of several variations on who is best. Best last year? Best for all time? Best risk adjusted return? Best in terms of lowest drawdowns? This time around, we're mixing things up- with an exciting new ranking algorithm, and a breakdown designed to be more useful to investors attempting to gain insight into the industry.
http://jlne.ws/wY21IC
**Top Large firms include: Briarwood Capital, Winton Capital, P/E Investments and Blackwater Capital.

A Secretive Hedge Fund Legend Prepares to Surface
CNBC
It's a humbling time for Louis Moore Bacon. The 55-year-old founder of the $15 billion Moore Capital Management -- and one of the premier hedge fund investors of the past two decades -- just weathered his second down year in the past four after a particularly ragged run in the markets.
http://jlne.ws/w2gPJQ
**JK - Best name in hedge funds.

Managed Futures Case Study – 2100 Xenon
High Frequency Trading Review
In this interview for the High Frequency Trading Review, Mike O’Hara talks to Jay R.Feuerstein and Bruce Mumford. Jay and Bruce are respectively Chief Executive Officer/Chief Investment Officer and Director of Marketing/Investor Relations at 2100 Xenon Group, a managed futures systematic hedge fund.
http://jlne.ws/zkDz7L

Managed Futures/Managed Funds

‘Crisis Alpha’ With Risk Management: a ’40 Act Managed Futures Mutual Fund
Advisors are always looking for alpha on behalf of their clients, but they’re also–especially since the 2008-2009 crisis–focused more on risk management since at a minimum they don’t want their clients to lose money.
http://jlne.ws/yOfOhP
**DA: Altegris CEO Jon Sundt defines crisis alpha as "the ability to generate returns in a time of crisis." He points out that the Altegris 40 index was up 40 percent during the dotcom bust of 2000-01, outperformed during the '07-'08 credit crisis, and held its own during last summer's downturn.

Direxion Launches Managed Futures Strategy Mutual Fund Tied to Next Generation Index

Press release

The Fund seeks to replicate the Auspice Managed Futures ER Index. This index is a completely quantitative, rules-based managed futures index made up of 21 futures markets (containing both physical commodities and financials), whose methodology is repeatable and verifiable.

http://jlne.ws/xub2wq

Claymore launches managed futures ETF
Financial Post
Claymore Investments Inc. launched a new managed futures exchange traded fund on Monday, adding to the growing list of alternative hedging strategies now available to Canadian retail investors. The Claymore Managed Futures ETF tracks the performance of the Guggenheim Managed Futures Index and trades under the ticker symbol “CMF.” One unit is worth $20.10 in early trading Monday.
http://jlne.ws/z3QJGc

Credit Suisse Launches CS Multi-Asset Futures Strategy Index
MarketWatch
Credit Suisse today launched the CS Multi-Asset Futures Strategy Index (CSMF), a dynamic, rules-based index designed to generate positive absolute returns in all market cycles with low correlation to any one specific asset class. CSMF aims to provide many of the advantages of managed, quantitative strategies, with the simplicity of investing in an index product
http://jlne.ws/zjylyS

SAC, KLS Turn To Morgan Stanley For Fundraising FINalternatives
Even the biggest names in the hedge fund industry occasionally need help raising money.
http://jlne.ws/xyZO2K

Managed Futures Scorecard		2/13/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	-0.30%	0.46
Newedge CTA Trend Sub-Index	-0.48%	0.54%
Newedge Trend Indicator	-0.40%	-2.14%
Newedge Short-Term Traders Index	-1.24%	-1.47%
Newedge Macro Trading Index		0.64%
Newedge Commodity Trading Index		1.45%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		0.04%
Barclay UCITS Index		3.29%
Barclay Hedge Fund Index		2.99%
BTOP FX Index	0.86%	0.17%
Morningstar Long/Short Com. Index	1.52%	1.77%

Pensions & Institutions

Texas County & District reaches hedge fund target
Pensions & Investments
Texas County & District Retirement System, Austin, finished the buildout of its hedge fund portfolio with a $175 million allocation to hedge fund manager Graham Capital Management for investment in the firm's managed futures flagship, Graham Global Investment Fund.
http://jlne.ws/wNzgJh
**DA: In December, TCDRS put $175 million into Winton Capital's managed futures fund.

Average College Endowment Performance Improves and Size Matters
AllAboutAlpha
The National Association of College and University Business Officers (NACUBO), in collaboration with the education and research arm of Commonfund, have released their annual study of the performance of college and university endowments. This study, which draws on a database supplied by 823 U.S. institutions of higher learning, reports that endowments’ average return for the 2011 fiscal year (the twelve months beginning July 1, 2010) was significantly improved over the year preceding, but that returns remain below the average inflation-adjusted spending rates for such institutions. This indicates that endowments continue to suffer from the damage inflicted by the crisis of 2008.
http://jlne.ws/AzGzSJ

Top 200 pension funds still carrying torch for alternatives
Pensions & Investments
U.S. pension fund investors' love affair with alternatives is still alive, with investments in everything from private equity to real estate skyrocketing, Pensions & Investments' annual survey of the 200 largest retirement plans shows.
http://jlne.ws/zC8Llg

CalPERS reviewing its investment forecast
Sacramento Bee
CalPERS is about to take another look at its investment forecast, just weeks after California's other big pension fund reduced its outlook. A lowered forecast puts more pressure on taxpayers and employees to support a public pension fund.
http://jlne.ws/xtPqQE
**DA: Hmm. The state may not be able to afford an "official" change in forecast. Didn't we just go through this with ratings agencies and subprime debt? Just asking.

Institutional investors set to dump poor hedge fund performers
Pensions & Investments
Institutional investors will be sharpening their scalpels in 2012, cutting managers that failed to provide what they promised: absolute return. Last year was the second-worst year for hedge fund performance in the 22 years that Hedge Fund Research Inc. has been tracking industry returns, and the patience that institutional investors had for subpar hedge fund performance is evaporating fast, said industry sources.
http://jlne.ws/xc8IPK

Pension Funds Get Queasy over Private Equity
Businessweek
Mitt Romney’s campaign for the Republican Presidential nomination may be creating funding headaches for his former colleagues in the private equity industry. Romney’s opponents have characterized Bain Capital—the firm he helped found in 1984 and left in 1999—and other buyout managers as corporate looters who enrich themselves at the expense of ordinary workers.
http://jlne.ws/x9lICl

Regulation

CFTC Final Rule: Registration and Compliance Obligations for Commodity Pool Operators and Commodity Trading Advisors
MarketsReformWiki
On February 9, 2012, the CFTC published its final rule on compliance obligations for commodity pool operators (CPOs) and commodity trading advisors (CTAs). CPOs and CTAs that are registered with both the CFTC and SEC ("dual registrants") will be required to file reports to the SEC similar to Form PF, the systemic risk reporting requirement, mandated by the Dodd-Frank Act, and to be used by the Financial Stability Oversight Council. Mutual funds that use futures and swaps tied to commodities will be required to register with the CFTC, just as they had been prior to the granting of the exemption by executive order in 2003. The National Futures Association (NFA) sought the change to improve protection of retail investors.
http://jlne.ws/wNQp7I

Fight Over Commodities in Funds
by Jeff Benjamin, Investment News
There is a growing regulatory movement afoot aimed at reducing commodities exposure within mutual funds dramatically just as this alternative strategy is gaining popularity. While this is something financial advisers will want to watch, it is not a reason to cash out of commodities- or managed-futures-based mutual funds just yet. http://jlne.ws/wk4A0y
**DA: The offshore model is in place because current mutual fund rules limit commodity investments to 10 percent. Not everything is a conspiracy, Sen. Levin.

Goldman’s Rogers Says Volcker Rule Could Increase Risk
Bloomberg
Goldman Sachs Group Inc. (GS) said a proposed U.S. ban on banks’ proprietary trading and limits on their investments in private equity and hedge funds may boost financial-system risks the measure was designed to curtail. “Without substantial revisions, the proposed rule will define permitted market making-related, underwriting and hedging activities so narrowly that it will significantly limit our ability to help our clients,” John F.W. Rogers, the firm’s chief of staff, said in one of two comment letters on proposed Volcker rule restrictions. The rule would stifle Goldman’s ability to help clients “raise capital, manage their risks, invest their wealth and generate liquidity,” he wrote.
http://jlne.ws/x4FLGj

Volcker Rule Faces Critics as Effective Date Nears
Bloomberg
The world’s largest banks demanded a wish list of changes to a proposed U.S. ban on proprietary trading, seeking to escalate the lobbying effort against the Volcker rule five months before it takes effect. In scores of comment letters filed yesterday, bankers and their trade associations said the so-called Volcker rule would increase risk, raise investor costs, hurt U.S. competitiveness and be vulnerable to legal challenge.
http://jlne.ws/xoMTFb

Bill to end carried interest deduction introduced in House
Pensions & Investments
Legislation to end the carried interest deduction for private equity general partners, requiring them to pay ordinary income tax rates up to 35%, was introduced in the House Tuesday. Rep. Sander Levin, D-Mich., ranking member of the House Ways and Means Committee, introduced the bill. President Barack Obama's fiscal 2013 federal budget contains a similar proposal. “There is absolutely no reason why income earned for managing other people's money shouldn't be taxed in the same way as income earned teaching or working in a factory.”
http://jlne.ws/y8w1hA
**DA: And Congressmen should not be allowed to trade on inside information.

Bart Mallon – Cole-Frieman & Mallon [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Tue, 14 Feb 2012 22:27:00 +0000

Bart Mallon is a partner and co-founder of Cole-Frieman & Mallon, a San-Francisco-based law firm specializing in hedge fund and alternative investment legal services. His areas of specialization include setting up offshore hedge funds and separately managed structured accounts, compliance and registration issues. Mallon is also the author of the Hedge Fund Law blog. John Lothian News Editor-in-Chief Jim Kharouf spoke with Mallon about managed futures mutual funds, CFTC Regulation 4.5, the Volcker Rule and other compliance issues related to managed futures.

Managed Futures Newsletter, February 1, 2012

noreply@blogger.com (Jim Kharouf) — Wed, 01 Feb 2012 20:00:00 +0000

Five Minutes with Carlton Chin of Adamah Capital

Carlton Chin is chief investment officer and head of research at CARAT/Adamah Capital LLC, a fund manager and CTA focused on systematic managed futures strategies. An investment professional since 1990, he spoke with Managed Futures Newsletter editor Jim Kharouf about his start in the business, whether markets change and how he looks at volatility.

Q: How did you got into the managed futures space?

I’ve been in managed futures since 1993. My first job was as an actuary, a pension consultant actuary where we’d put a price tag on a pension. I always had an interest in finance, so when the company started up the investment finance practice, I jumped at the chance. We did asset allocation, due diligence on money managers, performance attribution in the early ‘90s. Then we started hearing about hedge funds and alternative investments and that’s when I met the folks over at Mount Lucas Management, whose numbers I began to run through the portfolio optimizer. Long story short, I truly believe that the best way to enhance diversification is through managed futures. A lot of hedge funds will use the same basic building blocks - using stocks and bonds - while managed futures uses everything from currencies to commodities. That really adds diversity to a portfolio. I ended up working at Mount Lucas for almost three years.

Q: You’ve been focused on quantitative research and strategies. What has been your approach to new strategies and how has that changed or evolved over the years?

A: Numbers, probability and numerical simulation have been part of me, something I’ve loved since a young age. Numerical simulation was my thesis in college and that kind of quantitative and systematic approach is something I believe in. And in the managed futures industry, it’s a really good way of earning excess returns from the markets. I still focus mainly on systematic approaches. Over the years, I think I’ve made good progress on intermediate to long-term trend-following approaches. I’m starting to do a little more research on fundamental types of term structures of the futures markets. But my core is quantitative and systematic approaches.

Q: I’d like to touch on the old question about the markets “Do they change?” We all know information comes faster through the system. But the structure of the markets have changed – with electronic trading, which has brought in more institutional players into commodities markets. There seems to be more to it than, things are just faster.

A: I agree. When I first started out, Grant Schaumburg and Frank Vannerson of Commodities Corporation were some of the originators in managed futures. Some of them originally looked at the fundamentals but then said we need help with technical trend following. He was one of the first who wanted to use long-term systems. Back in the 60s and 70s, you could hop on some long-term trends and generate some profits. But information flow changes things and what you said is even more astute. The whole market structure has changed. That’s why I’ve done some research on the machine learning approach that helps adapt to how things evolve over time.

I think you have to be careful because you can run into problems of curve-fitting if you aren’t careful. But you can’t sit there with the same static strategies either.

Q: So I get the idea that you don’t think things change too much over time. Why?

A: They do change some, just not a significant jump. I do think when the structure changes, that can be a step function of a change. But I think human nature really helps dictate if person A goes long gold. Those kinds of psychological feelings, even with faster information, are not going to change.

Q: Managed futures and hedge funds are often thought of by investors and outsiders as black boxes. How do you explain what Adamah Capital does in straight forward terms?

A: Some people will look at me as a kind of rocket scientist. But people in the industry know me as sort of well grounded. I think my research and approach is well grounded also, with either an academic or scientific kind of approach. So my core remains in the long and intermediate trend following.

I’ve also looked at shorter-term time frames, some pattern recognition and machine learning components. The great thing about those is that they add a little bit of diversification, or some would call it a bit of mean reversion. And that helps differentiate ourselves. I still think that is the best way to achieve profits, by intermediate to long-term trend following. I try not to say any hocus-pocus. I’ve always loved Mount Lucas’ approach which is based on core reasons why we can earn returns from the managed futures industry.

Q: Managed futures had a great 2008 as an industry. The managed futures industry continues to grow. BarclayHedge says the CTA space managed $320.3 billion in Q3 2011, up from 299.2 billion in Q2 and $291.4 billion in Q1. What’s driving that investment trend?

A: More and more people are seeing the diversification benefits. Some of that trend is driven by the endowments. Years ago, some of the large institutional investors, endowments and pension funds, were mostly stocks and bonds. Eventually they started doing the commodities indexes, such as the Rogers Raw Materials Index and Goldman Sachs Indices. Those helped get their feet wet in commodities and futures a little. Now people see that buy and hold strategies may not be as good as active strategies. 2008 was great because managed futures had positive returns during a crazy time for the stock market. 2010 and 2011 haven’t been the greatest for the industry, but the benefits of diversification are still showing through.

Q: BarclayHedge’s CTA Index also showed a 3.05% drop in 2011 but was up 6.26% in 2010. What’s been the difference in your opinion?

A: It’s not an easy thing. If it were, everyone would be doing it. People love to say, I’m going to buy low and sell high. But futures traders are wanting to buy high and sell higher. That’s a trend following type of motto. Because of that, we need some large sustained trends in the market. One way to describe it is that the managed futures industry captures the Black Swans out there. And 2008 was of course a Black Swan. The end of 2010 we had some big moves that the managed futures industry captured. Sometimes there are going to be periods of consolidation in the market, especially the key major markets in currencies, energy, gold. Those markets are in a consolidation phase after 2008 and 2010. It’s frustrating for the industry but I think it has shown that we will earn the excess returns in the long run.

Q: Volatility is always a part of the markets of course. How do you look at volatility in the market and what have you seen in your research?

A: We’ll look at volatility in just about any way that we can. I love to look, especially for hedge funds and managed futures, at downside volatility. We can look at the standard deviation of the S&P 500, which over the past 30-plus years is 15.6 percent. Interestingly, if you look at the downside volatility, that is 11.7 percent. So the scary, or downside volatility, represents 75 percent of the overall volatility. This is one place where managed futures shines because based on a series of returns, mostly the BarclayHedge CTA Index but also my performance, the volatility has been 17 percent in total. The standard deviation is about 17 percent which is a little higher than the S&P 500 but if you look at just the downside volatility, when the performance for managed futures was negative, that number is just 10.1 percent. Then if you take that ratio, as a percent of downside volatility, the overall standard deviation is just 60%. Even the bond market, 67 percent of the overall market is downside risk, which is greater than managed futures’ 60 percent. That helps managed futures to really shine.

Q: That has to be a key selling point for managed futures.

A: Different investors will ask, what is the volatility of your trading system? I think it’s very interesting that volatility of many managed futures programs is tuned to be similar to the S&P 500. That’s because people understand the risk of the stock market. We have a similar standard deviation to the stock market but if you look at the standard deviation on the downside risk, it’s actually less risky.

Q: Managed futures is often overshadowed by the hedge fund space. What can or should the CTA industry do to raise its visibility?

A: Once people look at the managed futures industry, immediately what they see is liquidity and transparency. Positions can be monitored in real time. Normally, there is no lock up. A lot of CTAs have daily liquidity out there.
On a side note, I’ve been lucky to work with some folks at the University of Chicago and Frank Vannerson was from Princeton. These academic studies can add credibility as well, and show that managed futures/alternative investments have benefits.

After a Delay, MF Global's Missing Money Is Traced
NYTimes.com
Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing, people briefed on the investigation said.
http://jlne.ws/xtZKNOhttp://www.blogger.com/img/blank.gif

This is No Bank Robbery - Commentary by John J. Lothian
John Lothian Newsletter
When someone robs a bank and gets away with the money, they have somethinhttp://www.blogger.com/img/blank.gifg fungible (cash) and easily hid. While the authorities may be able to trace the serial numbers on the bills as they start to show up in circulation, there are no other official records for the physical bills to be traced. The MF Global situation is different. Money is missing, like in a bank robbery, but the money all moved into and out of MF Global’s bank accounts where there are all kinds of physical and virtual records to trace the whereabouts and the end location of said funds.
http://jlne.ws/y9ObtT

MF Global Executive Is Set to Tell of Concerns
WSJ.com
The chief risk officer when MF Global Holdings Ltd. collapsed is expected to tell a congressional committee that he sounded concerns about the firm's European sovereign-debt bet in July 2011. Michael Stockman is set to testify before the oversight-and-investigations subcommittee of the House Committee on Financial Services on Thursday.http://www.blogger.com/img/blank.gif
http://jlne.ws/ym6SPf

Lead Stories

JC Flowers' former UK boss fined £2.9m in fraud case
Telegraph "Ravi Sinha submitted false invoices to a JC Flowers company in a desperate attempt to recoup multi-million pound investment losses made http://www.blogger.com/img/blank.gifat the height to the credit crunch.
http://jlne.ws/x4ROot
**DA: More bad press for Flowers, on the heels of the MF Global meltdown

Hedge funds brace for euro zone break-up
Reuters
Nervous hedge funds managers are stress-testing their portfolios and searching for ways of protecting themselves against their worst nightmare -- a potential break-up of the euro zone. With talks on restructuring Greece's debt mountain still deadlocked, and the exit of one of more countries from the euro seen as a small but definite possibility, funds are modeling scenarios ranging from a 50 percent slump in European stocks or a 45 percent fall in the oil price to a 30 percent http://www.blogger.com/img/blank.gifrise in gold.
http://jlne.ws/yIJhib
**DA: As I read this, I was reminded of the immortal words of Helmut Schlesinger, Bundesbank president in 1992 regarding the common currency: "I have nothing against it apart from its name. I think it should be called the Deutsche Mark."

Hedge Funds Lift Bets to Two-Month High as Rally Accelerates: Commodities
Bloomberg
Hedge funds increased wagers on rising commodity prices to the most in two months and the rally in raw materials accelerated as the Federal Reserve pledged to keep borrowing costs low for three more years. http://www.blogger.com/img/blank.gif

Bruising year for commodities hedge funds
FT.com
The commodities hedge fund industry has suffered its worst year in more than a decade as the sector’s top managers recorded heavy losses amid volatile markets. The average commodity hedge fund fell 1.7 per cent in 2011, according to a closely watched index compiled by Newedge, the first loss since the index was crhttp://www.blogger.com/img/blank.gifeated in 2000 and down from a rise of 10.7 per cent in 2010.
http://jlne.ws/wP4CZB

Sentiment an Uncorrelated Investment Strategy
Opalesque
Christopher Foster is known as the architect of sentiment strategy. He is the CEO of Blackheath Fund Management, a managed futures advisory firm (CTA) based in Toronto, and serves as the portfolio manager for their sentiment program. He began developing his strategy during his time with Friedberg Mercantile Group (FMG) where he analyzed crowd behavior and sentiment indicators for making trades.
http://jlne.ws/yJWTVchttp://www.blogger.com/img/blank.gif

Managed Futures/Managed Funds

Beating Market Benchmarks: It's Time to 'Take Some Risk'
US Business News - CNBC
Investors have gotten a modest break in January from financial markets moving in lockstep, as they employ a variety of strategies to help diversify portfhttp://www.blogger.com/img/blank.gifolios. The persistent 2011 trend of markets trading in either risk-on or risk-off mode crippled returns for active managers in particular, with just one in four beating the benchmark indexes they use to gauge the effectiveness of their strategies.
http://jlne.ws/x5HwOJ

Bursa Malaysia Readies New Clearinghouse For 1Q Launch
Fox Business
Bursa Malaysia Bhd is preparing to launch a new trade-clearing facility for its derivatives markets that will enable the Kuala Lumpur exchange to offer a broader range of contracts, according to a senior executive. The firm anticipathttp://www.blogger.com/img/blank.gifes the new clearinghouse, built on technology supplied by Korea Exchange, to start operations in the first quarter, said Sree Kumar, general manager of business development for Bursa Malaysia.
http://jlne.ws/AwByv7
**DA: The place to go to trade crude palm oil futures. Malaysia produces half the world's supply

Mutual Funds Using Hedge-Fund Strategies Haven't Delivered
Barrons.com
Hedge funds' growing asset base and supposed ability to provide positive returns in all sorts of market conditions have proved a potent attraction to mutual-fund companies, particularly after the financial crisis in 2008. Morningstar cites more than 300 mutual funds that now offer exposure to alternative strategies that have low market correlation, like equity long/short, market-neutral and managed futures.
http://jlne.ws/zRSHB8http://www.blogger.com/img/blank.gif
**DA: This is a brand new sector. At least wait one full business cycle before writing them off.

Hermes Unveils CTA Platform
FINalternatives
Fund of hedge funds Hermes BPK Partners has launched a managed accounts platform for commodity trading advisors. The new Alpha Vault Managed Futures program http://www.blogger.com/img/blank.gifwill focus on global, mid-sized CTAs with traditional characteristics. It debuted with some $275 million in initial assets.
http://jlne.ws/Akh4AB

Managed Futures Scorecard 2/1/2012

Newedge Indices MTD Return YTD Return
Newedge CTA Index 0.30% 0.30
Newedge CTA Trend Sub-Index 0.23% 0.23%
Newedge Trend Indicator -2.03% -2.03%
Newedge Short-Term Traders Index 0.10% 0.10%
Newedge Macro Trading Index -1.31%
Newedge Commodity Trading Index -4.16%
Newedge Volatility Trading Index 1.32%

Barclay Indices MTD Return YTD Return
Barclay CTA Index -3.0%
Barclay UCITS Index 0.59%
Barclay Hedge Fund Index 3.41%
BTOP FX Index 0.26% 0.26%
Morningstar Long/Short Com. Index 0.65% 0.65%

Pensions & Institutions

Pension funds win time to tackle Emir problems
FT.com
Deferring a problem in the hope that it will go away is not usually recommended as a good way to deal with challenges, but sometimes it really does work. The Ehttp://www.blogger.com/img/blank.gifuropean asset management industry hopes it has found such an instance with the European markets infrastructure regulation (Emir) requirement that all over the counter derivatives be centrally cleared.
http://jlne.ws/xjRkUO

Alternatives secure highest allocations from us college and university endowments in 2011
Hedge Funds Review
US college and university endowments favour allocations to alternatives, including hedge funds. Best returns in 2011 came from commodities/managed futures, energy/natural resources and venture capital. US college and university endowments returned just over 19% net of fees on investments for the fiscal year 201http://www.blogger.com/img/blank.gif1. This was an improvement over 2010 when returns were up on average 11.9% and helped recover the loss of 18.7% in 2009.
http://jlne.ws/AyxiiZ

13 major global pension markets see 4% asset rise to $27.5 trillion
Pensions & Investments
Retirement assets in the 13 major global markets increased 4% to a record $27.5 trillion in 2011, according to Towers Watson's annual Global Pension Assets Study. Global pension fund assets have now grown at more than 6% on average annually since 2001 when they were valued at $15 trillion. The U.S. accounts for 59% of total pension assets, followed by Japan at 12% and the U.K. at 9%, according http://www.blogger.com/img/blank.gifto the study.
http://jlne.ws/x31BJ7

US most likely to lead equity rally in 2012, say hedge fund managers and institutional investors
Hedge Funds Review
Over half of hedge funds and institutional investors think the US is most likely to lead an equity rally this year. The EU came second with 16%, according to a Hedge Funds Review website poll. A majority (57%) of hedge fund managers andhttp://www.blogger.com/img/blank.gif institutional investors think the US is most likely to lead a global equity rally in 2012, according to a Hedge Funds Review website poll.
http://jlne.ws/xQCerW

Bills would free Florida Retirement System to invest up to 20% in alternatives
Pensions & Investments
Florida State Board of Administration, Tallahassee, would receive authorization to raise its alternative investments allocation to 20% from the current 10% under two bills pending in Florida legislative committees. The increase would allow the board to implement the 16% alternative investments allocation it adopted in 2010 for the $122.9 billion Florida Retirement System defined benefit plan after a study by Hewitt EnnisKnupp, an investment consultant to the board.
http://jlne.ws/wqwZ7chttp://www.blogger.com/img/blank.gif

Record High Pension Assets Hit by Rising Liabilities
aiCIO
Global pension assets hit a record high at the end of last year, but burgeoning liabilities meant funding ratios were in a worse state than 12 months earlier, a survey has shown. Assets held in defined benefit and contribution schemes at the end of 2011 hit $27.5 trillion, according to investment consulting firm Towers Watson. This figure showed a 3.9% increase in the asset level over the 12 months,http://www.blogger.com/img/blank.gif but this was much lower than the 10.9% rise over 2010.
http://jlne.ws/A2PYPm
**DA: Why does bad news always accompany the good news in the pension world?

Regulation

Frequently Asked Questions - Trading Program Performance Calculations and Presentation by CTAs with Client Assets held at MF Global, Inc.
National Futures Association
As a result of the October 31, 2011 bankruptcy proceeding involving MF Global, Inc. (MFG), NFA has received a number of questions from CTAs regarding how to calculate and present performance information for Trading Programs with client manhttp://www.blogger.com/img/blank.gifaged accounts that were affected by the MFG bankruptcy proceeding. NFA is issuing this notice to address those frequently asked questions.
http://jlne.ws/w5jp6Q

CFTC Should Have Power to Resolve Futures Brokers, O’Malia Says
By Matthew Leising and Silla Brush - Bloomberg
The U.S. Commodity Futures Trading Commission should have its own authorihttp://www.blogger.com/img/blank.gifty to put futures brokers into insolvency as part of additional powers following the collapse of MF Global Holdings Ltd., Commissioner Scott O’Malia said today.
http://jlne.ws/xnmG79

Taking Your Track Record With You
New York City Asset Management Law Blog
All of you portfolio managers, proprietary traders and research analysts accepting positions with new firms or striking out on your own should know that your track records are not automatically portable to your new situations. The SEC has a lot to say about whether and how you can use your returns. For one thing, your track record belongs to your current employer and not to you. If you're thinking of uhttp://www.blogger.com/img/blank.gifsing it, you need permission from your employer to do so. Interestingly, if you get that permission, you and your former employer may both be able to use the same track record (with each of you footnoting your separation from the other).
http://jlne.ws/xaOulX
http://www.blogger.com/img/blank.gif
Form PF: Operational Challenges and Strategic, Regulatory and Investor-Related Implications for Hedge Fund Managers
The Hedge Fund Law Report
In October 2011, the Securities and Exchange Commission and the Commodity Futures Trading Commission adopted the much-anticipated final rule for Form PF, which requires reporting of risk measurement information by registered investment advisers regarding the private funds they manage.
http://jlne.ws/9pAf0W

January 17, 2012 - Hedge funds lobby SEC over secrecy rule; How Managed Futures Fit Into Your Portfolio; MF Global Customers Wrapped in Red Tape

noreply@blogger.com (Douglas Ashburn) — Tue, 17 Jan 2012 21:28:00 +0000

Observations - Statistics - Commentary

Now that we have entered the latter half of January 2012, we possess all of the data necessary for an objective look back at 2011, and we can use that data to identify key trends for 2012. In this issue of JLN Managed Futures, several recurring themes have manifest themselves:

2011 was a bad year for returns on managed futures funds, and on hedge funds in general. However, net capital flows into managed futures, and of hedge funds in general, continue to grow.
Access to managed futures continues to trickle down to retail investors through managed futures funds and ETFs. Now, private fund managers are lobbying regulators to sever the "information firewall" between accredited and non-accredited investors.
The fallout from the MF Global bankruptcy continues to affect the industry. Money is still missing, clients are still angry and the calls for reform are getting louder.
Pensions, endowments, and other institutions are increasing allocations to alternatives. Is this an indication of the importance of diversification, or is it a "Hail Mary pass" to stay in the game after a decade of flat equity returns and ultra-low interest rates? Probably a little of both.

As 2012 progresses, some trends will continue; some will reverse. Other trends will come into play. It should be an interesting year.

Quote of the Day

“Managers generally take a cautious approach and strictly limit all types of communications about their business. For example, private fund managers generally will not respond to press enquiries, even to correct inaccurate reports.”

Richard Baker, MFA’s president in the FT story: "Hedge funds lobby SEC over secrecy rule."

+++++++++++++++++++++++++++++++++++++

Hedge funds lobby SEC over secrecy rule
FT.com
Hedge fund lobbyists have petitioned the US Securities and Exchange Commission to repeal the rule that lies behind one of the industry’s most notorious traits: its secrecy. The Managed Funds Association, which counts George Soros, John Paulson and Louis Bacon as members of its founding council, has implored the SEC to eliminate rule 502(c) of Regulation D – an arcane piece of Depression-era legislation that defines how the modern hedge fund industry operates.
http://jlne.ws/zQHGrz
**DA: I have always been a critic of Regulation D. Really, for a non-qualified purchaser, is there any harm in receiving information about hedge funds? I can't afford to buy a Ferrari, but should that preclude me from reading the spec sheet or watching a Ferrari commercial on TV?

Hedge fund indices down -5.28 in 2011 on average
The Dow Jones Credit Suisse Core Hedge Fund Index was down -0.41% in December, (-7.40% in 2011); The IndexIQ Hedge Composite Beta Index returned -0.17%, (-2.32% in 2011); The HFRI Fund Weighted Composite Index declined -0.18% (-4.8% in 2011); The HFRX Global Hedge Fund Index declined -0.42% (-8.87% in 2011).
http://jlne.ws/w43z7A

Agecroft Partners Predicts Hedge Fund Industry Trends for 2012
HedgeCo.Net
Hedge Fund News "Based on several dominant and emerging trends Agecroft has identified through their conversations with more than 300 hedge fund organizations and 2,000 institutional investors during 2011, Agecroft Partners predicts 2012 will be the best year for net flows into the hedge fund industry since 2007 despite the lackluster investment performance for the industry in 2011.
http://jlne.ws/wRoGO5

RenTech Best, Paulson Worst In 2011
FINalternatives
It may go down as the second-worst year in hedge fund industry history, but 2011, like all other years, produced a mixed-bag of hedge fund returns for the biggest names in the business.
http://jlne.ws/wmYbpL
**DA: Paulson Advantage Plus down 52 percent in 2011. Ouch.

Billionaire Paulson Persists With Property
Bloomberg
Mortgage securities are drawing buyers after tumbling last year and handing billionaire hedge fund manager John Paulson his first loss in the bond market.
Paulson, who made $15 billion in 2007 betting against U.S. subprime mortgages, is sticking with bullish investments in residential and commercial mortgage securities, helping his Credit Opportunities Ltd. fund gain about 1 percent last quarter to narrow its 2011 decline to 18 percent.
http://jlne.ws/wsS9Ny
**JK - Question, is he looking at the very ratings that brought down the real estate market in 2008? Just asking.

China and Japan offer best options for hedge funds in terms of talents and opportunities
Tony Morrongiello - Opalesque
Asia is offering the most fertile space for hedge funds opportunities, particularly China and Japan which could become the biggest talent pool in the world in the next five or 10 years next to the United States, agreed panellists in the recent Opalesque Geneva Roundtable sponsored by Custom House Group and Taussig Capital and held at the offices of Caliburn Capital Partners.
http://jlne.ws/zkc2u4

Managed Futures Scorecard		1/17/2012

Newedge Indices	MTD Return	YTD Return
Newedge CTA Index	0.29%	0.29%
Newedge CTA Trend Sub-Index	0.61%	0.61%
Newedge Trend Indicator	-0.06%	-0.06%
Newedge Short-Term Traders Index	-0.06%	-0.06%
Newedge Macro Trading Index		-1.49%
Newedge Commodity Trading Index		-3.61%
Newedge Volatility Trading Index		0.86%

Barclay Indices	MTD Return	YTD Return
Barclay CTA Index		-3.05%
Barclay UCITS Index		-8.55%
Barclay Hedge Fund Index		-5.33%
BTOP FX Index	-0.31%	-0.31%
Morningstar Long/Short Com. Index	1.49%	1.49%

Lead Stories - MF Global

MF Global Probe Focuses on Back Office
WSJ.com
Investigators on the hunt for an estimated $1.2 billion in customer money missing since MF Global Holdings Ltd. collapsed are zeroing in on the securities firm's back-office operations in Chicago, people familiar with the situation said. One back-office employee has told people she disputes congressional testimony by Jon S. Corzine, MF Global's former chairman and chief executive, that she provided assurance that a $200 million transfer was proper, according to people familiar with the matter.
http://jlne.ws/xqGRnC

MF Global Trustee's Presentation to Customers and Clients, January 12, 2012
Epiq Systems
The Trustee’s presentation to former MF Global Inc. customers and other creditors. During the meeting, held on January 12, 2012, the Trustee provided information about the customer claims process and an update on the progress of the court-mandated liquidation of MF Global Inc.
http://jlne.ws/zazk2J
**DA: Reading between the lines on page 9 of the presentation: $6 bn in customer claims, less $5.283 bn in "assets marshalled" equals $717 million in missing funds.

MF Global Customers Wrapped in Red Tape
WSJ.com
Stanley Haar says he knew how much money MF Global Holdings Ltd. owed him after about five minutes reviewing old account statements. But completing a claim form, he said, took more than two days. "That's nuts," said Mr. Haar, a Boca Raton, Fla. commodity-fund manager, who had about $10 million in customer money—about 10% of the total fund—with MF Global when the firm sought bankruptcy protection on Oct. 31.
http://jlne.ws/xvi6Wj

National Futures Association Board of Directors Contested Election
Opalesque
With regulatory issues faced by the National Futures Association (NFA) punctuated by the MF Global saga, two well-known industry veterans are running for two separate slots on the NFA board, jointly proposing a fresh look at the managed futures regulatory structure. Ernest Jaffarian and Doug Bry are challenging two other well-known industry participants Aleks Kins and Craig Caudle. Mr. Kins and Mr. Caudle were the only candidates recommended by the NFA nominating committee while Mr. Bry and Mr. Jaffarian successfully petitioned to be on the ballot. Ballots are being sent out and must be returned by January 17, 2012.
http://jlne.ws/yetV3l

Managed Futures/Managed Funds

361 Capital Launches Two New Mutual Funds
MarketWatch
361 Capital, a provider of alternative investment portfolios to institutions, financial intermediaries, and high-net-worth investors, today announced the launch of two mutual funds built on two of the firm's existing alternative strategies, the 361 Long/Short Equity Fund and the 361 Managed Futures Strategy Fund. http://jlne.ws/wxG3YP
**DA: BarclayHedge estimates around 100 managed futures fund launches in 2010-11. Here is another.

Horizon Cash Management seeks to expand in Europe
Investment Europe
Chicago-based Horizon Cash Management has announced plans for an extended drive for European business.
The 20-year old operation, which manages some $2.5bn in cash deposits and near assets, said its intentions reflect manager and investor recognition on both sides of the Atlantic of the importance of the cash process within investment portfolios, and the value of independent, third party cash management services to maximize investment returns.
http://jlne.ws/w9qmmZ
**DA: Third party cash management services also provide an additional layer of collateral protection. Not a bad idea.

Asian hedge fund size increasing as managers embrace better corporate governance
Hedge Funds Review
http://jlne.ws/xwiBcr
**Subscription required.

European hedge funds line up bets on China downturn
Reuters
European hedge fund managers are betting that China's once red hot economic growth will cool dramatically in 2012, hitting companies, economies and commodity prices that have been fuelled by the world's second largest economy in recent years.
http://jlne.ws/yDyjfp

How Managed Futures Fit Into Your Portfolio
Forbes
Managed futures assets add juice to a portfolio in times of economic stress because they are uncorrelated to the broader markets, explains fund manager Dave Kavanagh. He also details how his fund makes investment decisions, and why he avoids making sector bets.
http://jlne.ws/xxhCGH

Pensions & Institutions

Institutional investors in $1bn club set to allocate even more money to hedge funds in 2012
Hedge Funds Review
Data and intelligence provider Preqin says institutional investors allocating $1 billion or more to hedge funds will be key to shaping the industry. Many are allocating to emerging hedge fund managers. A group of 150 investors representing over $430 billion in assets invested into hedge funds are key to shaping the industry as it evolves into an institutional quality market, according to research* from Preqin.
http://jlne.ws/ymSwXk

2012: What lies ahead
Hedge Fund Manager
In what promises to be an unpredictable year for hedge funds, HFMWeek takes on the unenviable job of predicting the main themes to look out for in the coming 12 months
http://jlne.ws/zVjqGN

Pensions turn to alternative investments
FierceFinance
It’s no secret that pensions, facing cringing future liabilities as the ranks of pensioners grow, are near-desperate for returns. They have turned aggressively to alternative investments, much to the cheer of hedge funds and private equity funds. But is this a mistake?
http://jlne.ws/xqX5W4
**DA: Flat stock market, zero interest rates, and mass retirement of baby boomers on the horizon. Many pension funds have no alternative to alternative investment.

Commentary: Is Rube Goldberg managing state pension funds?
by Phil Troyer, Indiana Policy Review
It wasn’t mentioned in his State of the State message, but Gov. Daniels will leave for his successor a frustratingly complex and under-performing pension-management system.
http://jlne.ws/w8iHC8
**DA: The author obfuscates the nature of portfolio construction and benchmarking, but one fact from the article was quite interesting. "The system shelled out more for “investment expenses” during 2011 than it paid in actual retirement benefits for police officers, firefighters, judges, excise police, gaming officers, conservation enforcement officers, prosecutors and legislators – combined."

Regulatory

The Volcker Rule Will Kill Government Bond Markets
Forbes
It looks like more than just one part of Dodd Frank needs fixing, not just the rules on conflict minerals. The Volker Rule is producing a certain amount of disquiet as well. The essential problem is that the rule stops banks from engaging in proprietary trading. But proprietary trading is the way that government bond markets work, through market makers. So the ban will, if not kill, at least seriously reduce liquidity in government bond markets and thus make the whole process, both of borrowing and investing in them, more expensive.
http://jlne.ws/yxpHig

The 2012 Regulatory and Market Landscape
WSJ.com
Depending on whom you ask, the so-called Volcker rule will mean either the end of banking as we know it or toothlessly allow banks to continue to bet the house—with the backing of the U.S. taxpayer. Neither of these extremes are true, of course.
http://jlne.ws/y0cdB3

Custodians get to grips with new rule for private fund managers
Financial News (subscription required)
Custodians and fund administrators are setting up new services to deal with the latest reporting rule put in place by regulators, concerning the managers of non-mutual funds.
http://jlne.ws/wzbGnY

CFTC Final Rule: Protection of Cleared Swaps Customer Contracts and Collateral
MarketsReformWiki
On January 11, 2012, the CFTC approved its final rule on the protection of cleared swaps customer contracts and collateral. Under the final rule, swaps customer funds will be legally separated, but operationally commingled (the "LSOC Model"). Cleared swaps customer collateral will be segregated from the FCM’s own property, but cleared swaps collateral of all FCM cleared swaps customers will be permitted to be kept together pre-bankruptcy in one account.
http://jlne.ws/xGj3sW

JLN Managed Futures, January 3, 2012

noreply@blogger.com (Ryan Lothian) — Wed, 04 Jan 2012 06:31:00 +0000

Observations - Statistics - Commentary

Top MarketsWiki.tv Videos of 2011

Here are our top 3 videos of the year.

Emil Van Essen
December 1, 2011
Emil van Essen has 25 years experience trading and modeling in the futures markets and has been a CTA since 1997. His firm, now with $240 million in assets under management, has been successful with its spread trading program launched in December 2006. JLN Managed Futures editor Jim Kharouf spoke with van Essen about his trading program, how the industry evolved and the issue on most minds in the industry, what impact will MF Global have on the managed futures space.
http://bit.ly/rOP59W
Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance. Investment in this fund is open to QEP investors only.

Jay Feuerstein - 2100 Xenon
October 3, 2011
Channel(s): Featured, JLN Managed Futures
Jay Feuerstein is chief executive officer and chief investment officer of 2100 Xenon, the managed futures affiliate of Old Mutual Asset Management. From January through August 2011, its managed futures program was up 13.83 percent, while its Global Long/Short Fixed Income program rose 8 percent, outpacing the BarclayHedge CTA Index, down 0.51 percent through August. JLN Managed Futures editor Jim Kharouf spoke with Feuerstein about 2100 Xenon, market volatility, challenges in the CTA space and where his firm got its name.
http://bit.ly/AAZIiH
Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance.

Ranjan Bhaduri - AlphaMetrix (2 Parts)
July 6, 2011
Ranjan Bhaduri is chief research officer at AlphaMetrix, a Chicago-based company providing hedge funds and investors with an independent platform, administration, transparency, risk monitoring and analytics, due diligence, background investigation and hedge fund event services. JLN Managed Futures editor Jim Kharouf spoke with Bhaduri about how the CTA space is changing, its diversity and its interesting follow-up to the well-known John Lintner managed futures study.
http://bit.ly/y8iAEw

Upcoming Events

Managed Funds Association Network 2012 Conference
Sunday-Tuesday, January 29-31, 2012, The Breakers Hotel, Palm Beach, Florida. MFA’s Network series is the alternative investment industry’s premier networking conference and exposition. Launched in January 1995, Network has grown to become MFA’s flagship conference event and is expected to draw nearly 1000 delegates in 2012.
http://jlne.ws/uS45vn

FIA Boca 2012
Join 900 of the top names and faces in the industry at the FIA 37th International Futures Industry Conference in Boca Raton, FL, March 13-16, 2012. Along-side a top-tier program comes the best networking experiences you'll find all year. One delegate said, "The FIA conference at Boca Raton should be an annual pilgrimage for any executive in the futures industry. This event brings together, in one great location, the key decision makers and industry leaders... allowing one to squeeze months worth of meetings over just a few days!" The first registration deadline for this event is mid-December, so register now for the best prices.
http://jlne.ws/AC5l52

CTA Expo New York, April 19, 2012
Don't miss your opportunity to promote your business to the top managed futures industry professionals. For additional information visit www.ctaexpo.com or to sponsor please contact Frank Pusateri at Frank@ctaexpo.net or Bucky Isaacson at Bucky@ctaexpo.net.
http://jlne.ws/x5eAQr
**DA: Last year's Chicago and New York events were sellouts; the program continues to grow. For 2012, they have added a Miami show as well.

Lead Stories

Investigation Into MF Global Expected to Heat Up
By BEN PROTESS - NY Times
When customer money disappeared from MF Global over Halloween weekend, it seemed implausible the cash would remain at large come New Year’s Day. But two months later, the hunt for roughly $1.2 billion in client money continues. Some MF Global customers, including farmers and hedge funds, are still without about a third of the money in their accounts at MF Global, the brokerage firm once run by Jon S. Corzine, the former governor of New Jersey. Against this backdrop, and as 2012 gets ready to begin, the investigation into the MF Global debacle is expected to heat up.
http://jlne.ws/su6mAO

The Unraveling of MF Global
BY AARON LUCCHETTI AND MIKE SPECTOR - WSJ
In September, MF Global Holdings Ltd.'s management sent a memo to the securities firm's 2,800 employees: Start printing on both sides of paper. The unusual request was a sign that executives at the New York company then led by Jon S. Corzine, a former New Jersey governor and Goldman Sachs Group Inc. chairman, saw tougher times ahead. They were right.
http://jlne.ws/ujUaIt

Hedge Funds Raise Bullish Bets on Commodities
Bloomberg
Speculators increased wagers on rising commodity prices by the most since August 2010 on signs that sustained economic growth will drive a rebound in raw materials from their first annual slump since the recession. Hedge funds and other money managers increased combined net-long positions across 18 U.S. futures and options by 18 percent to 536,907 contracts in the week ended Dec. 27, Commodity Futures Trading Commission data show.
http://jlne.ws/tQjnhX

Making the case for alternatives
InvestmentNews
If ever there was a time to embrace investments in alternatives, this is it. More than 300 distinct open-end mutual funds now are available across seven alternatives subcategories, according to Morningstar Inc., making the days when only the ultrarich and well-connected could access noncorrelated and hedging strategies seem like ancient history.
http://jlne.ws/vCE64Q
**DA: From the article: A recent Rydex/SGI survey found that the number of investors with NO alternative exposure dropped from 28 percent to 17 percent from 2010 to 2011. That is quite a drop.

The Opalesque Uncorrelated Investments Show
Opalesque
Opalesque's Uncorrelated Investments Show is a new program that focuses on investments that exhibit a lack of dependence on economic strength and stock market performance.
http://jlne.ws/wfICXP
**DA: The host, Mark Melin, is a good friend of ours. He has been an avid cheerleader for managed futures as an asset class.

Managed Futures/Managed Funds

Newedge - Newedge Indices
As of December 29, 2011, the Newedge CTA Index up 0.27 percent for the month; down 4.45 percent year to date. Its Trend Indicator Index up 4.69 percent in November, which turned it positive for the year. The company also tracks quantitative and discretionary macro, commodity, and volatility indices.
http://jlne.ws/s4SaCC

Managing Volatility with Managed Futures
AdvisorOne
So many of the supposedly “non-correlated” asset classes sure were correlated during the economic crisis in 2008 and 2009, leading to investor disappointment and a re-evaluation of their role in the portfolio. However, the managed futures class wasn’t one, performing to expectations and fueling a boom in their use as a hedge against Europe, a possible double-dip and wild market swings that increasingly put the norm in “new normal.”
http://jlne.ws/ulrR7e

Merrill: Hedgies Sell Gold & Silver, Bet Short On S&P 500
By Murray Coleman, Barrons.com
Large managed futures funds, including hedge funds, in the past week sold gold and silver, kept buying U.S. dollars and added to their short positions in the S&P 500, according to an analysis by Merrill Lynch using data from the Commodity Futures Trading Commission as well as its own sources.
http://jlne.ws/s6P5JQ

How to Use Alternative Investment Strategies
Forbes
Currencies, commodities, and managed futures can be part of a portfolio that complements more traditional equities. Direxion Funds’ Ed Egilinsky describes why alternative investments are a good idea when it comes to assets with a long-term record of showing positive returns during equity bear markets.
http://jlne.ws/rNOGLM

CTA funds could prosper in volatile 2012
COO Connect
CTA (commodity trading advisor) hedge funds could be net beneficiaries of market volatility and see capital inflows in 2012 as a result, one manager has argued. “Historically, volatility has been good for CTA managers and I believe they will benefit from their exposures in oil, gold and other commodities. Investors are going to take note and allocate money into these outfits,” said Peter Kambolin, chief executive officer at Systematic Alpha Management, a short-term systematic CTA with $150 million in assets under management (AuM). "
http://jlne.ws/rSMU9f

Boutique money managers lead way with alternatives
InvestmentNews
When the average investor looks at the biggest alternatives mutual funds, the fund world's most familiar names probably won't show up. Unlike traditional asset classes, which tend to be dominated by funds from giant money managers, the new and fast-growing world of funds that invest in alternative strategies has opened opportunities for smaller, less well-known firms. So even though they are not household names, firms like Hussman Funds, AQR Capital Management LLC and Altegris Investments Inc. have been able to gain traction.
http://jlne.ws/u0NOTH
**DA: Mutual fund "big boys" such as Oppenheimer, Janus, and BlackRock are finally getting into the managed futures game.

Pensions & Institutions

100 largest public pension plans see first asset declines in 5 quarters: Census Bureau
Business Insurance
Total assets of the 100 largest public defined benefit retirement systems declined 8.5% in the third quarter, their first overall quarterly loss in more than a year, according to the Census Bureau. The top 100 plans had total assets of $2.5 trillion as of Sept. 30, a 1.1% increase over the same quarter in 2010, but investment returns were negative for the first time since the second quarter 2010, with $198.6 billion in losses recorded in the third quarter.
http://jlne.ws/zPmY30

Ten Trends For Hedge Fund Flows In 2012
WSJ.com
Last year was the second-worst for hedge fund performance on record, according to data from Eurekahedge. But Agecroft Partners, a third-party marketing group based in the U.S., thinks things will be better in 2012 and has outlined its reasons for predicting $100 billion of net inflows. If Agecroft is proved right and hedge funds do go on to attract $100 billion from investors this year, it would make 2012 the best year for inflows since 2007. Below are 10 trends that Agecroft thinks will impact inflows in the sector this year.
http://jlne.ws/Afeb94
**DA: Pensions, endowments, foundations and family offices top the list.

How risk factors influence the investment strategy of a sovereign wealth fund
WSJ
For some inkling of where investment theory is headed, take a look at the debates and forums being hosted by the Norwegian Government Pension Fund. Fund officials are in the midst of an inquiry into why their fund, which invests proceeds from Norway’s vast petroleum exploits, performed so poorly in 2009 and how it should re-orient itself . Unlike, say, a hedge fund, Norway’s pension fund conducts a big portion of its business in the public eye, which means you can get a heck of an education simply by tuning in to the presentations given by the bevy of academics the Norwegian government has brought in to look at the performance.
http://jlne.ws/zFs5OO
**DA: Leave it to the Norwegians, who encounter 20 hours of darkness this time of year, to shed some light on the subject.

Nuveen Investments Completes Acquisition of 60% Stake in Gresham
MarketWatch
Nuveen Investments, a leading global provider of investment services to institutions as well as individual investors, today announced the completion of its acquisition of a 60% stake in New York-based Gresham Investment Management LLC. The transaction, which was previously announced in November of 2011, was completed on December 31, 2011. Gresham is recognized as one of the world's leading investment managers focused exclusively on portfolios providing clients around the world access to a diversified array of commodities.
http://jlne.ws/A6hlzp

Regulatory

Washington’s uneasy dance with Wall Street: 2011 in financial regulation
The Washington Post
It was a long, hard slog this year for financial reform-- both for the federal agencies tasked with carrying out Wall Street reform and the politicians fighting over its future. Industry lobbyists swamped regulators in an effort to shape the new regulations, while Republicans tried to use the confirmation process and the budget to rein in Dodd-Frank. At the same time, outside events, both in the United States and Europe, added a new sense of urgency to the financial overhaul. Here is a closer look at the biggest developments in 2011.
http://jlne.ws/seKdY8
**DA: Of course, MF Global appears in the article.

Convicted Ex-Lawyer Scott Rothstein Says That Funds Didn’t Warn Investors
Bloomberg
Scott Rothstein, the Florida lawyer sentenced to 50 years in prison for running a $1.2 billion Ponzi scheme, said officials at three Manhattan hedge funds helped him prop up the fraud in its final months, according to transcripts of a court deposition. Rothstein, 49, said his scheme began to collapse early in 2009, when he could no longer pay customers. Officials at Platinum Partners Value Arbitrage, Centurion Structured Growth LLC, and Level 3 Capital Fund agreed not to tell potential new investors he failed to make payments to them, he testified.
http://jlne.ws/vd9u0p

SEC Ups Its Game to Identify Rogue Firms
WSJ.com
It is the Securities and Exchange Commission's new "most-wanted" list: a chart covered with handwritten notes, yellow highlighter and the names of about 100 hedge funds. The hedge funds have one thing in common: Their performance seems too good to be true, with some trouncing the overall market and others churning out modest results without ever suffering a down month. Some funds on the list stumble but still always outperform rival hedge funds.
http://jlne.ws/taPBvJ

Former Deutsche Bank CEO Hilmar Kopper: 'Money Needs Laws'
SPIEGEL ONLINE
As the former head of Deutsche Bank, Hilmar Kopper was once the most powerful banker in Germany. In an interview with SPIEGEL, the 76-year-old takes stock of his career and the current crisis shaking Europe. The three main constants he has seen in the world, he says, are "money, avarice and greed."
http://jlne.ws/siu4v8
**DA: From the article: "I am an old man and no longer have to worry about offending people." Happy New Year.

JLN Managed Futures: December 15, 2011

noreply@blogger.com (Ryan Lothian) — Thu, 15 Dec 2011 15:54:00 +0000

Observations - Statistics - Commentary

Attention CTAs: Your Input is Requested
CTA Expo/Horizon Cash Management
As the CTA Expo grows more successful each year, attendees continually ask, "How do I add value to the next conference"? Several years ago, Horizon Cash Management published an article catered to the managed futures industry with tips and suggestions, from the very people who work in the industry, about how to make the most of a conference. For 2012, Horizon will publish a modernized article and they are looking for new contributors. Simply stated, what is the best advice you can give to making the most of a conference?

Please send your response to Andrea Cosentino (andrea@horizoncash.com) along with your name, title and company to be featured in the new piece. You may also respond anonymously, if you prefer. The best responses will be included in the article which will be posted on the CTA website, Horizon website, as well as distributed at the 2012 CTA Expo conferences in New York, London, Chicago and Miami.

Managed Funds Association Network 2012 Conference
Sunday-Tuesday, January 29-31, 2012, The Breakers Hotel,Palm Beach, Florida MFA’s Network series is the alternative investment industry’s premier networking conference and exposition. Launched in January 1995, Network has grown to become MFA’s flagship conference event and is expected to draw nearly 1000 delegates in 2012.
http://jlne.ws/uS45vn

MF Global

Special MF Global Section on JLN Blog
John Lothian Newsletter
In the wake of the MF Global bankruptcy, John Lothian Newsletter has created a special section on JohnLothianNewsletter.com devoted to news, information and commentary. The section features archived news stories featured in the John Lothian Newsletter, analysis and breaking news. Check regularly for updates.
http://jlne.ws/t7WBfU

Insight: MF Global puts harsh light on self-regulation
Reuters via Yahoo! News
WASHINGTON (Reuters) - Two weeks after MF Global's collapse, officials from the Commodity Futures Trading Commission briefed Senate staff on the brokerage firm's final days. When asked about reports that the brokerage firm had written checks that bounced when customers tried to cash them, the regulators had an admission that surprised the room: they didn't know about the bad checks.
http://jlne.ws/rq5NZi **JK - Always good to be four or five weeks behind the issue.

Exclusive: Regulators know where MF Global funds went
Reuters
Regulators now have a more complete picture of money transfers in the final days of bankrupt brokerage MF Global, but must sort out which transactions were legitimate before more money can be released to customers, a top official told Reuters on Wednesday. Jill Sommers, who is heading the Commodity Futures Trading Commission's review of MF Global, said regulators "are far enough along the trail" that they know where the money went.
http://jlne.ws/udsXRU **JK - Misleading headline. Story actually says they're pretty sure. Two different things.

MF's Corzine said to know of customer fund misuse
Reuters
The regulatory arm of CME Group has turned over interviews to the Justice Department that allege former MF Global chief Jon Corzine knew that the now-bankrupt brokerage firm used customer money to lend to a European affiliate, a CME executive said on Tuesday.
http://jlne.ws/vgipUU

Lead Stories

Opalesque launches “Futures Strategies”, its second Premium Research Publication on Managed Futures and CTAs
Press Release
Opalesque has launched Opalesque Futures Strategies to help Qualified Eligible Participants and Accredited Investors to invest in and benefit from Managed Futures and CTAs.
http://jlne.ws/vXa4KB

Paulson Fund Loses 46% in 2011 Through November
Bloomberg
John Paulson, the billionaire money manager having his worst year, has lost 46 percent in 2011 through November in one of his largest hedge funds, according to an investor update obtained by Bloomberg News.
http://jlne.ws/rpO9Ar
**DA: Catching "Lightning in a Bottle" is hard to do once; to duplicate is nearly impossible. Shorting the housing market in '07 was going to be a tough act to follow.

MF Global debacle will deflate confidence in futures
Pork Network
Farm state lawmakers in Washington, D.C., are becoming increasingly restless with the lack of answers related to the MF Global bankruptcy. Not only did the firm’s recent collapse take between $600 million and $1.2 billion dollars of people’s money with it, many of those clients involved farmers who now do not have the funds to secure seed, fertilizer and equipment they will need for the 2012 production year.
http://jlne.ws/tSTbOs
**DA: A crisis of confidence is brewing in the Heartland.

Another reason for gold, oil plunge: missing MF Global funds?
MarketWatch
One of the head scratchers about Wednesday’s trading was that oil and gold were falling so steeply, easily outpacing the decline in stocks. Natixis credit-markets strategist Abdullah Karatash offers this explainer (among others) for the drop in currencies and commodities on a day with otherwise light trading volumes: "The first reason is that investors likely bailed out of risky managed futures funds on the heels of the ongoing MF Global missing money story."
http://jlne.ws/so3mN8 **DA: Reminds me of the Iran-Contra scandal, when everyone tried to shift blame to ex-CIA Director William Casey as soon as he died. Now, everything is MF Global's fault.

AlphaMetrix Teams Up With Decision Analytics to Launch Unique Next Generation UCITS Fund Family
MarketWire via COMTEX
AlphaMetrix LLC, founder and operator of the AlphaMetrix Global Marketplace, a U.S. leading edge technology based hedge fund platform, has entered into a strategic partnership with Decision Analytics Advisory Partners AG, the Swiss-based founder and operator of the Next Generation UCITS platform. The collaboration offers non-U.S. investors access to UCITS-compliant versions of proven CTA and hedge fund strategies of boutique alternative investment management firms who have completed the rigorous AlphaMetrix manager due diligence process.
http://jlne.ws/snTDJ5

Hedge fund group spent $1 million lobbying in 3Q
Bloomberg BusinessWeek
A trade group representing hedge funds spent more than $1 million in the third quarter lobbying federal officials on financial regulations, including a new rule that will expand disclosure requirements for the funds. The $1.02 million that the Managed Funds Association spent was 15 percent more than the $890,000 it spent a year earlier but slightly less than the $1.03 million it spent in this year's second quarter, according to the group's quarterly filings with the House clerk's office.
http://jlne.ws/rPrIUE
**DA: Educating legislators is expensive. In listening to the MF Global hearings this past week, it is apparent that our legislators need a LOT more.

Managed Futures/Managed Funds

Newedge - Newedge Indices Newedge CTA Index up 0.38 percent in November; down 7.2 percent year to date. Its Trend Indicator Index up 5.72 percent in November; down 4.02 percent year to date. The company also tracks quantitative and discretionary macro, commodity, and volatility indices.
http://jlne.ws/s4SaCC

Look to the future
By James Millard, FT Adviser
Managed futures strategies have attracted significant attention from some of the world’s largest institutional investors in recent years, growing to $300bn (£192bn) assets under management. Demand is now building from all investor types to access, through Ucits vehicles, the attractive risk and return characteristics that this strategy can deliver.
http://jlne.ws/uVn5gK

Cogent Research: Warming to Alternatives, Advisors Signal They are Ready to "Go Anywhere"
MarketWatch
Advisors embrace a "go anywhere" approach to achieving portfolio goals -- nearly 1/3 of all financial advisors who sell alternative investments (AI) predict that the Multi-Strategy and Managed Futures strategies have the greatest potential over the next 12 months. By contrast, providers offering Long/Short Interest or Market Neutral solutions are likely to experience lower interest in the coming year as advisors look to shift their AI holdings and categories. These and other findings are included in the new 2011 Alternative Investment Trends(TM) report which was released last week by Cogent Research. The report is based on a nationally representative survey of 1,643 retail investment advisors.
http://jlne.ws/ucUKAz

Onshore US retail investors choose alternative mutual funds for their non correlation attributes
Opalesque
A success story from 2011 lies in the work Gemini Fund Services has been doing with launching alternative registered mutual funds. The American investing public love them and Andrew Rogers, President of Gemini Fund Services reports that business is booming for them. "We have had a great 2011" he says. "We specialise in alternative registered mutual funds and so we have seen many managed futures funds launch this year – we have done 10 with $ 2.5bn under management."
http://jlne.ws/tKPePz
**DA: From the article: "Conservative is cool and people will take less returns for less volatility."

Whatever Happened to the Managed Futures ETF? Minyanville
Managed futures are an interesting if not inaccessible asset class to many investors. There is the allure of diversifying a portfolio into commodities without having to do the legwork yourself. And the historical outperformance of many managed futures funds against the S&P 500 is nothing to scoff at either. http://jlne.ws/uyraEP

Twelve for '12: Niche ETFs to Watch in the New Year
Wall Street Selector
The ETF Professor: It’s practically a sport among ETF critics these days, and no, we’re not talking about the tired practice of bashing leveraged ETFs. That went out of style with shoulder pads and the Miami Vice look. We’re talking about bashing niche ETFs. Apparently, ETF critics can tolerate the existence of basic fare such as the SPDR S&P 500 (NYSEARCA:SPY). Along comes an ETF like the Global X Fishing Industry ETF (NYSEARCA:FISN) and some folks get a little surly.
http://jlne.ws/ub8XhH **DA: Wisdom Tree Managed Futures has been elevated to "niche" status!

Tired of Turbulence, Pros Seek Alternatives
By Sarah Morgan and Jonnelle Marte, Smart Money
Like many financial advisers, Adrian Day sold a good chunk of his clients' equities when the market plunged this summer. But instead of holding the cash, he began snapping up precious metals -- first silver and then platinum, adding to his portfolio of gold, palladium and uranium. By October, the Annapolis, Md.-based pro had about 10% of the $160 million he manages for clients in commodities funds, nearly double the level of last year. http://jlne.ws/t555GC

Funds Cut Bets on Rising Food Costs to 27-Month Low: Commodities
By Elizabeth Campbell, Bloomberg
Hedge funds cut bullish bets on agricultural prices to the lowest level in more than two years on signs of expanding global supplies. A measure of speculative positions across 11 products from wheat to coffee to cattle fell 3.6 percent to 258,071 futures and options in the week ended Dec. 6, Commodity Futures Trading Commission data show. That’s the lowest since September 2009. Bullish wagers on corn fell 11 percent to a 17-month low, and bearish ones on cocoa increased for a fourth week.
http://jlne.ws/skLjXj

iShares Plans New Commodities ETF
By Cinthia Murphy and Alex Ulam, Index Universe
iShares, the world’s largest purveyor of ETFs, plans to market a futures-based commodities ETF designed to minimize contango and maximize backwardation—a follow-on to a first-generation fund it launched about five years ago that doesn’t target contango. The fund’s benchmark currently includes 19 commodities. http://jlne.ws/tyeHTQ **DA: Long-only commodity funds have been blamed for exacerbating contango. What will they say to this?

Managed Futures and Commodities: Overview and Outlook for 2012
Seeking Alpha
As 2011 draws to a close, many investors are looking back on the year and checking their investments. This year is definitely a year to forget. The S&P 500 is flat for the year, although many active equity portfolio managers are down for the year due to the relatively large swings in the stock market this year. http://jlne.ws/vUaDKt

Pensions/Institutions

2011 Review of the Year
HFM Week
Using the best December for a decade as a springboard, hopes for a strong 2011 were further buoyed by several bits of good news in early January. The hedge fund portfolios of US endowments had enjoyed a boost in 2010 the annual Nacubo Commonfund study revealed, year-end launch data was looking healthy, while HFMWeek began the year with several headlines on increased hedge fund allocations at big pensions funds, including Heineken and Rabobank.
http://jlne.ws/sFxccH

Large endowments grab healthy portfolio gains
Pensions & Investments
A glimpse into the secretive world of large U.S endowment funds reveals strong, benchmark- and index-topping returns of their hedge fund portfolios. Just six of the 25 largest U.S. endowments provided publicly available, detailed financial information for June 30, the fiscal year-end for many endowments. In examining that information, Pensions & Investments found the six had a collective $89 billion in assets as of June 30, of which $18.4 billion was in hedge funds.
http://jlne.ws/sALk0F

GE CEO Immelt confirms $1 billion pension contribution for 2012
Pensions & Investments
General Electric Co., Fairfield, Conn., reaffirmed plans to make its first employer contribution the GE Pension Plan since 1987. In a presentation during the company’s annual outlook investor meeting Tuesday, Jeffrey R. Immelt, GE chairman and CEO outlined a planned $1 billion contribution in 2012.
http://jlne.ws/sSAcCF

Blackstone's Biggest Investment Shows Clients' Clout
BusinessWeek
Blackstone Group LP won as much as $1.8 billion in state pension money from New Jersey, the most an investor has committed to the firm at one time since it opened its first buyout fund in 1987. Its client won lower fees. The state will put up to $1.5 billion into four new custom funds called separately managed accounts, according to terms approved today by the New Jersey State Investment Council. The remaining $300 million will go to three existing funds run by Blackstone, the world’s biggest private-equity firm.
http://jlne.ws/sOS3J5

Fund Allocation Challenges in Turbulent Times: Are Alternatives the Answer?
Hedgeweek
More than four years after the meltdown of the US sub-prime mortgage market sparked the onset of the financial crisis, allocators and investors still face a market environment that stubbornly refuses to return to ‘normal’. In fact, if anything the crisis is intensifying, not diminishing. In 2008 some of the biggest and best-known names in the investment banking industry –Bear Stearns, Lehman Brothers, Merrill Lynch – collapsed or were swallowed up. Three years later, MF Global has just shown that it can happen again.
http://jlne.ws/uzgJyB

Regulation

Why are Congressional Agricultural Committees Given Oversight on MF Global Hearings?
By Mark Shore, Shore Capital Management LLC
Over the years I’ve often heard the question “why are the U.S. House and Senate Agricultural committees
given jurisdiction and oversight of financial firms?” This question sometimes appears in the managed futures
course I teach at DePaul University. With the testimony of Jon Corzine former CEO of MF Global before the House Agricultural Committee on December 8th, 2011 and his testimony with the Senate Agricultural Committee on December 13th, 2011 regarding the bankruptcy of MF Global, the 8th largest U.S. bankruptcy, this would be a good opportunity to discuss this question.
http://jlne.ws/vjCvnw
**DA: Nice condensed history of the exchanges, Acts of Congress, and regulatory authorities. Shore teaches a great course in managed futures at DePaul, and was kind enough to invite me as a guest speaker last month.

Financial groups hit by flood of new rules
By Brooke Masters, Financial Times
Financial services firms worldwide are being hit with an average 60 regulatory changes every working day, a 16 per cent increase over last year, and no let up is in sight, a study has found. Regulators around the world announced 14,215 changes in the twelve months to November, up from 12,179 for the same period a year earlier, according to new research by the Thomson Reuters governance, risk and compliance unit.
http://jlne.ws/u18TTb

ASIC to release guidelines for hedge funds
Investor Daily
ASIC will release a regulatory guide for hedge fund disclosure early next year, following its release of a consultation paper in February this year. Alternative Investment Management Association (AIMA) Australia president Kim Ivey said that their collaborative work with ASIC has resulted in an improvement in understanding "what the other party is looking for" on both sides.
http://jlne.ws/u834it

Family Offices Seek Shield From SEC Disclosure
Bloomberg
Family offices in the U.S. are trying to avoid regulation that would force them to reveal financial details about their privacy-conscious clients.
http://jlne.ws/rGmbCJ

A Layman's Guide to Regulation 1.25
MarketsReformWiki
Commodity Futures Trading Commission (CFTC) Regulation 1.25 - Investment of Customer Funds, has been at the top of the news these past couple of weeks. In the wake of the MF Global bankruptcy scandal, the focus has been on the treatment of customer funds at the failed futures commission merchant/broker-dealer, and its soured investments in European sovereign debt. In the midst of the investigation of MF Global and the search for $1.2 billion in missing customer segregated funds, the CFTC approved its final set of rule changes to Reg. 1.25 related to the Dodd-Frank Act.
http://jlne.ws/rMwu5l
**DA: The author is a personal friend of mine. On some days, he is my only friend in the world.

JLN Managed Futures: December 1, 2011

noreply@blogger.com (Ryan Lothian) — Thu, 01 Dec 2011 20:56:00 +0000

Observations - Statistics - Commentary

Emil van Essen has 25 years experience trading and modeling in the futures markets and has been a CTA since 1997. His firm, now with $240 million in assets under management, has been successful with its spread trading program launched in December 2006. JLN Managed Futures editor Jim Kharouf spoke with van Essen about his trading program, how the industry evolved and the issue on most minds in the industry, what impact will MF Global have on the managed futures space.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance. Investment in this fund is open to QEP investors only.

MF Global

Special MF Global Section on JLN Blog
John Lothian Newsletter
In the wake of the MF Global bankruptcy, John Lothian Newsletter has created a special section on JohnLothianNewsletter.com devoted to news, information and commentary. The section features archived news stories featured in the John Lothian Newsletter, analysis and breaking news. Check regularly for updates.
http://jlne.ws/t7WBfU

Senators to probe regulators' role in MF Global
By Christopher Doering and Sarah N. Lynch - Reuters
(Reuters) - Senators plan to press regulators on Thursday on whether they were asleep at the switch as now-bankrupt MF Global (MFGLQ.PK) took on massive risky bets, and why hundreds millions of dollars in customer funds are still missing.
http://jlne.ws/sGydqk
**JK - And who shall probe the Senators?

MF's Money Trail Zigzags
Regulators Are Vexed by and Sometimes at Odds Over Failed Firm's Funds
BY SCOTT PATTERSON AND AARON LUCCHETTI - WSJ
Regulators poring over MF Global Holdings Ltd.'s books have been flummoxed by a tangled money trail that crosses borders and different parts of the securities firm. The hunt for hundreds of millions of dollars in missing customer money has even put the regulators at odds.
http://jlne.ws/vTKH3P

MF Global Saga Crushes Confidence in System: Client
TheStreet
Dave Kavanagh, a 30-year veteran in the futures and fixed income markets, thought he had learned his lesson about due diligence, having already witnessed fraud firsthand at Refco in October 2005. While the funds were safely transferred through the bankruptcy process, Kavanagh, who now runs the Grant Park Managed Futures Strategy Fund (GPFCX), decided it was best to move money to a diverse number of Futures Commission Merchants (FCMs) and commodity brokers to avoid being trapped in the event of another bankruptcy. Ironically, one of the dealers he chose was MF Global.
http://jlne.ws/rFbSnV

MF Global customers taking case to Washington
MarketWatch
MF Global Holdings customers are preparing to bring their grievances over the firm's failure to Washington. "There wasn't anybody who was advocating for customers," said John Roe, a principal with BTR Trading Group, who has started a group called the Commodity Customer Coalition. The group, which represents customers who hold more than 7,000 MF Global accounts, is revving up a lobbying effort as Congress prepares to grill regulators on the MF Global bankruptcy and a shortfall of customer funds that could total $1.2 billion, twice what was originally thought.
http://jlne.ws/uTfebf

Lead Stories

Bank Commodity Staff Turnover Seen Gaining as Rules Tighten
Bloomberg
The world's biggest investment banks have greater staff turnover in commodities than in fixed-income and currencies because of tightening regulations on trading, according to Coalition, a London-based research company.
http://jlne.ws/vu7XTl
**DA: Once again, blame the regulators.

Asia Wary of Investing in the Commodities it Buys
By Clyde Russell, Reuters
Since Asia consumes the bulk of the world's commodities, you might think Asian investors would be interested in gaining exposure to the asset class. But the opposite seems to be the case, with Asian investors, both institutional and retail, having very little direct exposure to commodities and seemingly reluctant to diversify their mix of investments.
http://jlne.ws/tW4sEN

Commodities beat stock markets for a fifth straight year
Economic Times
Commodities are beating equities for a fifth consecutive year, a sign that demand from developing economies is sustaining global growth that drove prices up almost fourfold in a decade. While the MSCI All-Country World Index of equities dropped 15% this year and yields on Treasuries fell to near record lows, the Standard & Poor's GSCI Index of 24 commodities rose 2.1%. Goldman Sachs Group expects commodities to return about 15% in the next 12 months.
http://jlne.ws/vlohQ8

John Paulson to cover investor's losses
Richard Blackden, The Telegraph
Billionaire hedge fund manager John Paulson is reported to have taken the unusual step of promising to cover any losses of a prestigious New York cultural institution that has invested with him.
http://jlne.ws/viO11t
**DA: A money-back guarantee from the fund manager? This could set a bad precedent.

Managed Futures/Managed Funds

Alan Snyder: Not your average money manager
Washington Times
Alan Snyder is someone we should all listen to. Not only because he is a successful money manager and founder of Shinneckock Partners, but because he's really interesting. Mr. Snyder is an advocate of managed futures, which he strongly believes is the best way to invest to benefit his clients. He recently told The Wall Street Transcript, "The belief in futures stemmed from having been brainwashed when young and impressionable while getting an MBA at Harvard Business School. Harvard was one of the earliest converts to the belief that futures can lower volatility and enhance returns in a diversified investment portfolio. After years of seeing these effects actually work in our fund, we decided 18 years ago to establish a managed futures fund of funds as a standalone effort.
http://jlne.ws/rukbvh

Merrill: Hedgies Sell Crude, Gold & Tech In Week; Keep Buying Dollar
Barrons.com
Large managed futures funds, including hedge funds, in the past week reversed to sell positions in the tech-heavy Nasdaq 100 and added to their short bets on the S&P 500, while switching positions to sell gold and silver, according to an analysis by MerrillLynch.
http://jlne.ws/t93z6c

Hedge Funds in Positive Territory
By Mike Taylor, Money Management
Hedge funds continue to handle the current market volatility better than most, according to new data released by hedge fund and alternative investment industry specialist, Opalesque Ltd. October results for its series of indices tracking emerging hedge fund and managed futures fund managers - the Emanagers Total Index, consisting of both hedge funds (65 per cent) and managed futures funds (35 per cent) - gained 4.22 per cent in October.
http://jlne.ws/v0cMLK
**DA: From the article: Emanagers CTA Index up 11.9 percent on the year.

Morgan Stanley Smith Barney Increases Managed Futures Allocation
FX Week
Managed futures have low correlation to markets and perform well in difficult times, says Morgan Stanley Smith Barney (MSSB). Choppy markets and frequent trend reversals created a difficult environment for the strategy this year. MSSB is increasing its recommended allocation to managed futures, which it views as a safe-haven strategy in periods of market dislocation.
http://jlne.ws/vpJnoW

**DA: MSSB allocates 7-10 percent of portfolio in managed futures; 23 percent in all alternatives combined.

Striking gold in the wine cellar
By David Kaufman, Financial Post Investing
Although the definition of "alternative investments" is somewhat fluid, there are certain investments that clearly fall within this category. Investing in wine is one of these. While, at first blush, one might think of wine collecting, as with classic cars, art and antiques, as more of a hobby than an investment, I have discovered that investing in wine (especially through a professionally managed fund) is worth serious consideration by anyone seeking to diversify out of highly volatile equity holdings.
http://jlne.ws/uWOmnb
**DA: The trick is to refrain from drinking the portfolio.

How to Invest in the Globe's Booming Population
By MICHAEL MORELLA, U.S. News & World Report
The long-term outlook appears strong for agricultural commodities, fossil fuels, and metals. As the world's population balloons rapidly over the next few decades, so will demand for oil, gas, food, and all sorts of infrastructure.
http://jlne.ws/vQJ7E2

Pensions & Institutions

Coming soon: Pension apocalypse
Glen Cook, Las Vegas Review-Journal
You're stuffed with turkey. You're preoccupied with how you're going to get through your holiday obligations and shopping lists. You're already trying to ignore the presidential election that's 11 months away. With the economy in the crapper and Congress making drunken sailors downright respectable, you really don't want to ponder the coming pension apocalypse.
http://jlne.ws/w3X3xP**DA: Although this is a Nevada-centric article, the issues apply universally. I hear it is worse here in Illinois.

Investors turn to multi-asset funds
Dominic McCormick, Money Management
Dissatisfaction with the performance of traditional managed funds and the resulting criticism may see the rise of multi-asset solutions, according to Dominic McCormick. It is not surprising that many investors are dissatisfied with the performance of traditional diversified (balanced and growth) funds and their model portfolio brethren over the last decade.
http://jlne.ws/vRmv6I

Can large pension funds beat the market?
CBS MoneyWatch
A recent study on large pension plans provided some favorable evidence that they can generate alpha, or returns above an appropriate benchmark. However, a closer look at the study shows that the data may not be as favorable as it seems.
Before we launch into our discussion, let's review why it seems logical to believe pension plans of large companies could beat the market:
http://jlne.ws/sVVnS2

Preqin: Consultants to push for private equity, hedge funds, infrastructure
By Christine Williamson, Pensions & Investments
A majority of alternative investment consultants will recommend that their clients invest more in private equity, private real estate, infrastructure and hedge fund asset classes over the 12 months ending June 30, 2012, according to Preqin.
http://jlne.ws/vSOIal

Emerging Hedge Fund Managers Gaining Attention Despite Data
By Christine Williamson, Pensions & Investments
Emerging hedge fund managers are getting more attention from institutional investors because they tend to produce better returns than larger, more established funds, but industry insiders disagree about the extent of the outperformance.
http://jlne.ws/rW90Xy

Regulation

CFTC to Hold Open Meeting to Consider Two Final Rules and Two Proposals
Press Release
The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Monday, December 5, 2011, at 9:30 a.m.
http://jlne.ws/uLadk4**DA: Rules to be considered include final rules on the investment of customer funds and foreign boards of trade regulations. Two proposed rules will also be discussed.

Video: Interview with Ian Morley, senior consultant, Allenbridge Group
Hedge Funds Review
A negative market environment and the impending introduction of the AIFM directive will create challenges for hedge funds and fund of hedge funds next year but creative funds will survive. Morley, a managed futures pioneer, was founding chairman of the Alternative Investment Management Association.
http://jlne.ws/vgR5eT

Hedge fund managers: Dodd-Frank doesn't hurt, might help us
Washington Post
Contra claims that all of Wall Street opposes Dodd-Frank, a majority of hedge fund managers don't anticipate that the law will affect their business strategy - and some expect that they will actually benefit from the new rules, according to a new survey conducted by Aksia, a research and advisory firm. Of the 125 fund managers polled, "58 percent aren't expecting the latest financial regulations and 40 percent of the relative value managers polled said the new laws may even help their businesses," Advanced Trading reports.
http://jlne.ws/vdZnUr
**DA: Survey suggests that Volcker Rule and Basel III rules will shift risk-based operations away from banks.

EU watchdog unveils rules to protect customer assets
Reuters
European Union regulators has unveiled rules to better protect customers' assets from 2013, sparking a funds industry warning that typically low custodian fees would have to rise. The European Securities and Markets Authority (ESMA) published a 500-page set of rules on Wednesday to flesh out the EU's new law regulating alternative investment fund managers (AIFMD).
http://jlne.ws/sT14r5

Emil van Essen - Emil van Essen Managed Futures [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Thu, 01 Dec 2011 19:40:00 +0000

Emil van Essen has 25 years experience trading and modeling in the futures markets and has been a CTA since 1997. His firm, now with $240 million in assets under management, has been successful with its spread trading program launched in December 2006. JLN Managed Futures editor Jim Kharouf spoke with van Essen about his trading program, how the industry evolved and the issue on most minds in the industry, what impact will MF Global have on the managed futures space.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance. Investment in this fund is open to QEP investors only.

JLN Managed Futures: November 15, 2011

noreply@blogger.com (Ryan Lothian) — Tue, 15 Nov 2011 22:24:00 +0000

Observations - Statistics - Commentary

Notes on MF Global
While there are some interesting developments this month in the managed futures space, there is none more important than the ongoing MF Global collapse. This edition of JLN Managed Futures begins with a special section on MF Global, which represents a comprehensive overview of the issues surrounding the firm's bankruptcy and its aftermath. For up-to-the-minute coverage of the MF bankruptcy, see the JLN MF Global Bankruptcy News, a special section in the John Lothian Newsletter website.

As depressing as the MF fallout is for the industry, there are several "good news" stories featured in this issue. Managed futures continues to rise in status as an asset class. Popularity is spreading geographically, as highlighted in featured stories from Canada and China. Allocations to alternative assets are approaching the records set in the mid-2000s. We even have a story highlighting alpha-generation possibilities from the CFTC's new rules on position limits.

The fact remains that prudent investment in managed futures still provides enhanced returns and lower portfolio variation. If segregated customer funds have been illegally diverted, the first priority must be that customers are made whole, ASAP. Regulators and exchanges must then learn from the MF debacle and put the proper protocols in place so that next time (and, yes, there will be a next time), the transition is seamless.

MF Global News

Special MF Global Section on JLN Blog

John Lothian Newsletter

In the wake of the MF Global bankruptcy, John Lothian Newsletter has created a special section on JohnLothianNewsletter.com devoted to news, information and commentary. The section features archived news stories featured in the John Lothian Newsletter, analysis and breaking news. Check regularly for updates.
http://jlne.ws/t7WBfU

MF Global's Failure Raises Issues About Regulator
NYTimes.com
Futures trading, which caters to farmers as well as to hedge funds, was left largely untouched when lawmakers took on Wall Street after the financial crisis. But a light regulatory hand is now being called into question after the collapse of MF Global, the brokerage firm run by Jon S. Corzine until last week.
http://jlne.ws/vT2YJQ
**JK - CME now under the microscope.

Harris Bank Subpoenaed, Workers Sue over MF Global

Reuters

Fallout from MF Global Holdings Ltd's bankruptcy intensified as a U.S. regulator subpoenaed a bank that held some of its customers' money, while some of the 1,066 workers fired from the futures brokerage last week filed three lawsuits over their sudden dismissals.

http://jlne.ws/twSoeb
**JK - And Harris Bank too.

MF Global's Mass Layoff Only First Rumbling of Upcoming Storm
International Business Times
As wretched and unpopular as the decision to send over a thousand breadwinners into the street, it's likely just the beginning of unpopular decisions for Giddens. Compiled for your reading pleasure is a list of seven unpopular actions we'll probably see the MF Global liquidation trustee undertake.
http://jlne.ws/upT0Y3

False Lessons from MF Global
Managed Futures Blog
The MF Global fiasco makes for excellent media fodder. With all the juicy gossip a mid-day soap opera could hope for, it’s no surprise that many a journalist has attempted to add in their two cents. We often run into journalists who get confused on futures-related topics (there’s a reason we have to disclose that futures trading is complex), but if a piece is exceedingly erroneous, we’ll chime in with a correction. Now, as investors seek straight answers in the midst of a storm, it seems even more important to do so. So when we stumbled across Dan Solin’s article, What MF Global Can Teach You About Investing, there was little question in our minds that we needed to respond. We’ll look at the piece point by point. It’s a doozy.
http://jlne.ws/rqA2sb
**DA: From the referenced article: "The expected return on speculation is zero." Hey - that's better than the ten-year returns on my stock portfolio.

CTA wants to fill industry leadership void
Futures Magazine
James L. Koutoulas, CEO of Typhon Capital Management, is upset at the handling of the MF Global bankruptcy and wants to give a voice to the thousands of customers who don’t have a seat at the table. Koutoulas, who is also an attorney, is informally representing approximately 200 clients and brokers affected by the bankruptcy on a pro-bono basis in conjunction with the Northwestern Law Investor Protection Clinic. He wants to be appointed to the MF Global Bankruptcy Creditors’ Committee “to make sure individual clients and brokers are represented and have a voice on how the funds are distributed."
http://jlne.ws/vw11pa
*DA: According to Koutoulas, “These guys should have had 80¢ (on the dollar) paid out right away.”

Jon Corzine firm ‘nefarious or illegal,' regulator says
Tim Mak - POLITICO.com
Former New Jersey governor Jon Corzine’s former brokerage firm was engaged in activity that was “either nefarious or illegal,” said a U.S. futures regulator on Tuesday. It looks suspicious as heck to me. It is either nefarious or illegal, in my personal opinion. That’s why we have an investigation. The money should be there, it’s not. That money should be sacrosanct. It’s really troubling,” said Bart Chilton, a commissioner at the Commodities Futures Trading Commission, on CNBC’s Squawk Box.
http://jlne.ws/vefgrF

Lead Stories

This Asset Class Will Blow Past Stocks In 2012
Business Insider
Back in August, Morgan Stanley Smith Barney (MSSB) published a note titled "Dangerously Close To Recession." Since then, the wealth management firm has been advising clients to invest conservatively. They're underweight global equities and commodities. And they're overweight cash. More recently, however, they've been advising clients to overweight a more esoteric asset class: managed futures.
http://jlne.ws/thAbyF

Managed Futures Stumble in October; Barclay CTA Index Slides 1.50%
BarclayHedge
After four straight months of gains, managed futures lost 1.50% in October according to the Barclay CTA Index compiled by BarclayHedge. Year-to-date, the Index is down 2.30%. "A revival of animal spirits sparked by an improving economic picture and the appearance of a solution for Euro zone sovereign debt problems spawned trend reversals in many of the major futures sectors,” says Sol Waksman, founder and president of BarclayHedge.
http://jlne.ws/u0N79c
**DA: The only two categories to post positive gains were agriculture and discretionary traders.

What Hedge Fund Investors Want, Hedge Fund Investors Get
AllAboutAlpha
Most children make the threat at one point or another to hold their breath until they get what they want. In response to this, parents generally roll their eyes and say, “OK, go right ahead!” There may be a kid or two out there who has tried this trick with success, but I never knew any of them. According to the latest Preqin research on investors’ attitudes towards hedge funds, investors wanted increased transparency and liquidity and whether they held their breath or not, they got it. As a result, institutional investors remain committed to investing in hedge funds and assets under hedge fund management are once again approaching pre-crisis 2006 record levels.
http://jlne.ws/rTuABG
**DA: CTAs moving up the ranks in strategy preference, now ranking 3rd behind equity long/short and global macro.

Managed Futures/Managed Funds

Skandia launches global managed futures fund
FTAdviser.com
Skandia Investment Group has launched a global futures fund for investors seeking an uncorrelated asset class, just as its parent company announced a 7 per cent uplift in platform sales.
http://jlne.ws/vAXeoz

Six ways to predict your brokerage is about to crash
Reuters
The blow up of now bankrupt-MF Global proves that vetting a financial firm isn't ever simple. Companies use accounting tricks and other machinations to hide problems until the last possible moment.
http://jlne.ws/vsgAOX

Ride volatility with managed futures
by David Kaufman, Financial Post
Can something be a secret if everyone in the world knows about it, but you? In the case of Canadian investors and “managed futures” investing strategies, it appears so. Although not readily identifiable as an asset class, managed futures programs (run by commodity trading advisors, or CTAs) are multi-strategy alternative investments that invest in futures contracts and options on virtually any tradeable entity, including commodities, currencies, interest rates and equities.
http://jlne.ws/tbcKRe
**DA: Interesting note from the article: The threshold for "qualified investor" status in Canada varies by province. It is $1 million in Ontario. Beauty, eh?

China hopes turn investors back on to commodities
Agrimoney.com
Fund managers have ditched a negative stance on commodities amid "increased faith" in China's economy, a huge consumer of raw materials, and despite growing fears of deflation. Portfolio managers, who last month were at their most bearish on commodities for nearly two years, returned to a neutral position on the asset class, a survey by BofA Merrill Lynch said.
http://jlne.ws/tEsDqo

Pensions & Institutions

Institutional investors pour into hedge funds
Pensions & Investments
Institutional investors, especially U.S. public pension plans, have been pouring new money into hedge funds to the tune of $39.9 billion of net inflows and pending searches year-to-date through Nov. 10, according to Pensions & Investments' analysis of reported hedge fund search and hiring activity.
http://jlne.ws/vcrqzU
**DA: The $32.3 billion inflow YTD represents a 24 percent increase over 2010, but far behind the 2007 record year, in which institutions invested $66.1 billion in alternatives.

Brown's pension plan bold step to reform
San Jose Mercury News
The state's nonpartisan analyst on Tuesday called Gov. Jerry Brown's public pension proposal a bold first step for controlling the high cost of retirement benefits and urged lawmakers to make significant funding and benefit changes. The Legislative Analyst's Office commended Brown's plan to shift more of the financial risk for public pensions to employees. The plan released last month by the Democratic governor calls for increasing the retirement age to 67 for new, non-public safety employees and having local and state workers pay more toward their retirement and health care. It also would put new workers in a hybrid plan with a 401(k)-style vehicle. http://jlne.ws/t2FPPt

Asia’s Small Hedge Funds Woo Millionaires Amid Cash Squeeze
Businessweek
Hedge funds with assets of less than $100 million in the Asia Pacific region are turning to millionaires and family offices for investments as institutions favor funds with more than that amount and proven track records. http://jlne.ws/rvRuRY
*DA: $100 million seems to be the minimum threshold for pension & endowment interest. Fresh strategies come from startups with around $50 million.

Institutional Asset Manager Survey: Key trends in institutional asset management 2009-2011 and beyond
Hedgeweek
In light of the current fiscal and monetary concerns that are gripping the minds of investors around the world, Institutional Asset Manager asked the heads of some of the world’s leading asset managers to share their thinking on portfolio management trends post-Lehman and beyond 2011 in concise fashion. Catherine Vaughn Managing Director and Head of Asset Management, Highbridge Capital Management, examines alternative investments:
http://jlne.ws/vSDiBR

Endowments have yet to return to pre-Lehman levels
Assets under management at US college and university funds are still a long way off their pre-financial crisis levels, despite two years of double-digit returns. This is according to a report from the Commonfund Institute, an institutional investment manager for endowments, foundations and pension funds. The report highlights the extent to which these endowments were hit by the 2008 market collapse. Preliminary data from the Commonfund Institute has predicted that US endowments will return 19.8%, net of fees, for the year to June 2011, compared with 12.5% the previous year.
http://jlne.ws/v7I4VO

Aiding risk oversight
Pensions & Investments
The Securities and Exchange Commission's concept release on the use of derivatives by mutual funds, exchange-traded funds and other investment companies could serve as a valuable guide for other institutional investors. SEC asking for public input on derivative rules for mutual funds. It also could serve as a framework for examining other complex securities such as collateralized debt obligations.
http://jlne.ws/uqeCR3

FSA widens investment rules on unit-linked funds
Lifeinsurance.co.uk
Investors with £815 billion in unit-linked life and pension plans could benefit from new rules which will allow the funds to put money in different investments while making sure their money is still managed prudently. The Financial Services Authority (FSA) will allow unit-linked funds to put money in assets such as money market instruments which track indices. Unit-linked funds are used for pensions and investment bonds as well as life insurance plans including endowments and whole of life plans.
http://jlne.ws/uuk2q5

Regulation

Form PF gets into PE's business
The Deal Pipeline
Final publication of the form -- "PF" stands for "private fund" -- announced Oct. 31 by the Securities and Exchange Commission and the Commodity Futures Trading Commission, formally kicked off the Dodd-Frank Act's new requirement that private fund advisers disclose to the government more about their businesses. The new 43-page form must be filled out starting next year and applies to advisers of hedge funds, private equity funds, money market funds and liquidity funds.
http://jlne.ws/urp3uA
**DA: CTAs and CPOs affected by the rulemaking. See our page in MarketsReformWiki for more info.

Commodities: Position Limits and Arbitrage Possibilities
AllAboutAlpha
The recent (October 18) decision by the Commodity Futures Trading Commission imposing certain position limits might indeed create inefficiencies in the futures markets. This could prove an ill-wind for some participants in those markets, especially the classic commercial users/hedgers seeking protection against sudden changes in the costs of their inputs, but it could also create an opportunity for alpha hunters.
http://jlne.ws/v0UET9
**DA: Article starts with the old joke about the econ professor, the student, and the $100 bill.

FSA expands unit-linked investment list to counter Solvency II
Citywire
The Financial Services Authority (FSA) is to introduce further regulation allowing unit-linked pensions to use a greater range of investments when stringent Solvency II regulation comes into force.
http://jlne.ws/vjQcLk

Financial Transaction Tax Talk Just Won t Die
Traders Magazine
The stage was set prior to the G20 Summit in Cannes by French host president Nicolas Sarkozy to discuss global adoption of the FTT. The only problem was that there has never been international buy in for a FTT, and in fact, there was very strong opposition as recently as a year and a half ago in the lead up to the Toronto G20 Summit in 2010.
http://jlne.ws/sK1frZ
**DA: Volume is shifting to the Pacific Rim fast enough already. No need to expedite the move with a Tobin Tax.

MFA Submits Comment Letter to CFTC on Proposed Dodd-Frank Implementation Rules for Mandatory Swap Clearing, Trade Execution, and Margin Rules
Managed Funds Association
The OTC derivatives reforms (Title VII) resulting from the Dodd-Frank Act will cause sweeping transformation of the OTC derivatives markets once the pending rules are adopted – affecting all OTC market participants. MFA’s comment letter provided constructive recommendations to the CFTC in implementing final rules on clearing, trade execution, trading documentation and uncleared swap margining requirements in a way that will achieve mandatory clearing in a timely manner in U.S. markets, while avoiding disruption or undue strain on the resources of market participants and regulators
http://jlne.ws/sGtNMp

Proposed Guidance for CPOs with Pool Funds Held at MF Global, Inc.

noreply@blogger.com (John J. Lothian) — Wed, 02 Nov 2011 20:31:00 +0000

Proposed Guidance for CPOs with Pool Funds Held at MF Global, Inc.

NFA recognizes the need for our CPO Members to keep their pool participants informed as to what has occurred with MF Global, Inc. (MF Global) and how it may affect future operations. In this regard, NFA, in consultation with the CFTC, is providing guidance on disclosures that CPO Members with pool funds held at MF Global must make to their participants. At a minimum, CPO Members must provide their pool participants with a disclosure statement that includes the disclosures summarized below. Members are also encouraged to provide any additional disclosures that are necessary given their specific business operations.

If you are a Member operating a pool that has pool funds held at MF Global, you must make the following disclosures:

· On October 31, 2011, MF Global reported to the SEC and CFTC possible deficiencies in customer segregated accounts held at the firm. As a result, the SEC and CFTC determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets, and SIPC initiated the liquidation of MF Global under the Securities Investor Protection Act.

· As of (insert date) approximately $XXX of (Name of Pool)'s assets were on deposit in an account(s) at MF Global. These assets represent XX% of the (Name of Pool)'s net asset value of $XXX.

· The General Partner does/does not believe that these actions will have a material impact upon the operations of (Name of Pool) and its ability to:

o Satisfy redemptions requests;

o Adequately value redemption requests and the manner in which they will be handled;

o Accept new subscriptions in (Name of Pool) and properly value the net asset value for new subscribers; and

o Provide for accurate valuation in the (Name of Pool)'s account statements provided to participants.

· Participants are cautioned that there can be no assurances:

o That (Name of Pool) will have immediate access to any or all of its assets in accounts held at MF Global; and

o As to the amount or value of those assets in the context of the bankruptcy.

· Participants should also be aware that future actions involving MF Global may impact (Name of Pool)'s ability to value the portion of its assets held at MF Global and/or delay the payment of a participant's pro-rata share of such assets upon redemption.

The above disclosures must be provided to current pool participants through a separate written communication. In addition, Members who have a current disclosure document and plan to solicit new participants must ensure that they have updated their disclosure document to include these disclosures. In this regard, please remember that all amended disclosure documents must be submitted to NFA for review prior to use.

Further, with respect to the valuation of pool assets and redemptions, each Member is urged to consult with its CPA to ensure these items are reported in accordance with generally accepted accounting principles or international financial reporting standards, as applicable.

If you have any questions, please do not hesitate to contact the following individuals:

Mary McHenry at (312)781-1420 or at mmchenry@nfa.futures.org

Tracey Hunt at (312)781-1284 or thunt@nfa.futures.org

Todd Maines at (312)781-1560 or at tmaines@nfa.futures.org

JLN Managed Futures: November 1, 2011

noreply@blogger.com (Ryan Lothian) — Tue, 01 Nov 2011 22:48:00 +0000

Observations - Statistics - Commentary

Anthony Lazzara is co-founder and principal of Lido Isle Advisors, LLC., responsible for selecting and allocating to commodity trading advisors on behalf of the company’s clients. He spoke with JLN Managed Futures editor Jim Kharouf about what he looks for in CTAs today, which sectors of CTAs are doing well in this environment and what the CTA space needs to do to expand.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance.

Lead Stories

MF Global

Regulators Investigating MF Global for Missing Money
NYTimes.com
Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday
http://jlne.ws/vQdB3y

MF Global's collapse ripples through futures exchanges
Reuters
The fallout from the collapse of MF Global Holdings Ltd rippled through global exchanges on Tuesday, as operators moved to suspend the U.S. futures broker or limit trades of its customers. MF Global filed for bankruptcy protection on Monday following bad bets on euro zone debt.
http://jlne.ws/w0piBo

MF Global Bankruptcy Leaves Star Bankers Adrift as Industry Cuts
Businessweek
MF Global Holdings Ltd.’s bankruptcy filing is throwing into question the futures of some of Wall Street’s most experienced bankers.
http://jlne.ws/tm7ltp
**DA: I read this exact article 10 years ago. They just took out the word "Enron" and replaced it with "MF."

MF Global Exposes Prop-Trading Risk That Volcker Aims to Curb
Businessweek
Jon Corzine’s risk appetite helped destroy his firm. It also provided an object lesson for Paul Volcker’s campaign against proprietary trading on Wall Street.
http://jlne.ws/vrmfgi

JC Flowers Fund Said to See $47.8 Million Loss on MF Global
Businessweek
J. Christopher Flowers, the private- equity investor who installed Jon Corzine as the top executive at MF Global Holdings Ltd., may book a loss of $47.8 million on its investment in the New York-based broker-dealer, which filed for bankruptcy today.
http://jlne.ws/uoN9MO

CME Investigating MF Global
NYTimes.com
The investigation into hundreds of millions of dollars in missing money at MF Global has widened, as the CME Group confirmed on Tuesday that the brokerage firm failed to keep customer money separate from company money.
http://jlne.ws/vfVn3P
________________________________________

Managed Futures Hold Their Ground in 2011; Barclay CTA Index Gains 0.35% in September BarclayHedge
Managed futures gained 0.35% in September according to the Barclay CTA Index compiled by BarclayHedge. Year-to-date, the Index is down just 0.41%.
“Operation Twist in the US, sovereign debt uncertainty in Europe, and potential slowing in China all conspired to keep volatility high and to drive investors away from risk assets,” says Sol Waksman, founder and president of BarclayHedge.
http://jlne.ws/ucu3A4

Hedge fund strategies continue to take pounding from volatile markets
Hedge Funds Review
Hedge funds lost 2.69% on average in September, the second straight month of steep losses. Continued market volatility and the eurozone’s constant crisis state affected all strategies.
http://jlne.ws/sl2M9n
**From the article: "Commodity trading advisers (CTAs) in North America outperformed other regional managers, posting gains of 2.27% on average for the month."

Stock Market Losses Bring Hedge Funds Down; Barclay Hedge Fund Index Fell 3.92% in September
BarclayHedge
Most hedge fund strategies had losses in September, evidenced by a 3.92% drop in the Barclay Hedge Fund Index compiled by BarclayHedge. The Index has lost 7.45% in the 3rd quarter and is now down 6.53% in 2011. http://jlne.ws/uvkxTf

CFTC signs off on SEC joint rule for systematic risk disclosurePensions & Investments
The CFTC, as expected, on Monday approved final rules on collection of systematic risk data from private fund managers, including hedge funds and private equity funds, according to a news release from the Commodity Futures Trading Commission.
http://jlne.ws/utpunf
**See more in the Regulation section below

Managed Futures/Managed Funds

New Opalesque Emanagers Index
Opalesque
The Opalesque Emanagers Total Index, which launches today, is based on currently 293 emerging hedge fund and managed futures fund managers listed in the Emanagers database, the industry's only database dedicated exclusively to hedge fund management firms less than 48 months old and with assets under management of less than $600 million at the time of the firm's inception.
http://jlne.ws/uiZZO5
**From the article: Emerging hedge fund and CTA managers still in positive territory year to date, and have returned 60 percent since 2009.

Redemption day may be less haunting for Paulson
Reuters
Monday is D-day for John Paulson as many of his investors have until the close of business to say if they will stay or go. But whether this year's Halloween redemption deadline will be a scare or a true haunting for one of the world's biggest hedge funds may not not be known for a few days.
http://jlne.ws/u6ciuX

SVQuant’s managed futures program up 12 in September (+30 YTD) as markets seesawed Opalesque
SVQuant’s investment program called US Quantitative Portfolio (UQP) is holding up the good reputation that systematic funds are making for themselves this year - yet again after '08.
With a gain of 12% in September 2011 and 29.9% YTD – compared to -8.7% YTD for the S&P500 and -9.3% YTD for the GSCI – it is even outperforming some indices closer to home, such as the Barclay Systematic Traders Index (+0.11% est. in Sept., -0.73% YTD) or the Barclay CTA Index (+0.33% est. in Sept., -0.43% YTD).
http://jlne.ws/rIOGFC

Managed futures soften impact of volatile traditional markets study claims Opalesque
Last year’s survey of US institutions and financial advisers from Morningstar revealed that 66% of financial advisors believed that alternatives would become as or more important than traditional investments over the next five years.
Investment managers Altegris report that financial advisors awarded top ranks to managed futures strategies as offering the greatest growth potential through 2015 amongst alternative strategies. In their latest White Paper, entitled 'Managed Futures: Is the Trend Your Friend?’ Altegris says: "The appeal of managed futures is that they have shown their ability to thrive in up and down markets."
http://jlne.ws/obXrJQ

Innovation at heart of funds of hedge funds survival techniques
Hedge Funds Review
Funds of hedge funds are finding innovative ways to produce alpha and justify their fess. Some are turning to bespoke solutions, unconventional hedge fund strategies or different structures.
http://jlne.ws/uNCcT2

MFA Launches a New Website
Managed Funds Association
The Managed Funds Association (MFA), the voice of the global alternative investment industry, is proud to unveil its new website today. While our web address is the same, www.managedfunds.org, our new site has many new and exciting features including industry-leading research and informational tools to help viewers learn more about the global hedge fund and managed futures industry and track important policy and regulatory developments. http://jlne.ws/up3JQE

Pensions & Institutions

California Pension Changes Face Opposition by Brown Labor Allies
Businessweek
California Governor Jerry Brown’s plan for public workers to pay more for retirement and assume some risk with pension investments met opposition from the unions that campaigned for him and helped bankroll his election. http://jlne.ws/vm3UrW

Ill. Teachers Pour $725M Into Alternative Investments
FINalternatives
llinois' teachers are boosting their hedge fund investments, both now and for the future.
The $37.5 billion Illinois Teachers' Retirement System approved follow-on allocations totaling $450 million to three existing hedge fund managers and a $15 million investment in a commodity hedge fund launched by a Tudor Investment Corp. veteran. The pension's board also approved searches for as many as six more hedge funds and transition managers, with two to three new hires expected in each of the next two years." http://jlne.ws/u3Hta8

Australian hedge fund market holds opportunities for global hedge fund managers
Hedge Funds Review
Australian asset allocators, fuelled by the fourth-largest pension investment management market in the world, will increasingly turn to good hedge fund and fund of hedge funds managers for returns.
http://jlne.ws/uPhzgB

NYC Seeks to Merge Investment Management of Pension Funds
Bloomberg
New York City is seeking to combine the investment management of its five pension funds to drive down costs, improve decision-making and boost returns, Mayor Michael Bloomberg said.
http://jlne.ws/tNC6Rt

Regulation

SEC, CFTC sign off on private fund risk reporting Futures Magazine
The Commodity Futures Trading Commission (CFTC) today approved a final rule requiring certain advisors to private funds that are dually registered with the CFTC and the Securities and Exchange Commission (SEC) to report information to the SEC for use by the Financial Stability Oversight Council (FSOC) in monitoring risks to the U.S. financial system.
http://jlne.ws/tIwie8
** The statement on FormPF from MFA - http://jlne.ws/tu6mgn

BlackRock Praises Regulators’ Coordination on Hedge Fund Secrets
Businessweek
U.S. regulators were responsive to industry concerns over new disclosures for private-fund firms, changing the final rule to prevent unnecessary duplication, said Barbara Novick, co-founder and vice chairman of BlackRock Inc., the world’s biggest fund manager.
http://jlne.ws/sJtCHj

DB plans face new regulatory straitjacket
FT.com
Defined benefit pension schemes have dodged the Solvency II bullet, only to find themselves in the path of another potentially explosive regulatory missile. The European Insurance and Occupational Pensions Authority, in a consultation paper released last week, recognised Solvency II, designed for insurance companies, was not suitable for pension schemes. Instead, however, it suggested requiring pensions to present a “holistic balance sheet” explicitly valuing assets such as the sponsor covenant and access to an emergency fund such as the UK’s Pension Protection Fund.
http://jlne.ws/uSjiE9
**EIOPA acknowledges that the higher upfront costs may discourage pension participation. Unintended consequences.

Anthony Lazzara - Lido Isle Advisors [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Tue, 01 Nov 2011 18:37:00 +0000

Anthony Lazzara is co-founder and principal of Lido Isle Advisors, LLC., responsible for selecting and allocating to commodity trading advisors on behalf of the company’s clients. He spoke with JLN Managed Futures editor Jim Kharouf about what he looks for in CTAs today, which sectors of CTAs are doing well in this environment and what the CTA space needs to do to expand.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance.

JLN Managed Futures: October 17, 2011

noreply@blogger.com (Ryan Lothian) — Mon, 17 Oct 2011 15:04:00 +0000

Quote of the Day

“In the past few years, investors such as sovereign wealth funds, insurance companies, hedge funds and commercial banks (among others) have been taking a more active approach to cash. Now some pension funds are starting to realize the benefit of managing cash more strategically.”

~Kathleen Hughes, managing director and head of global liquidity management at Goldman Sachs Asset Management in London.

Observations - Statistics - Commentary

Managed Futures Mutual Funds Appear to Clear One Significant Regulatory Hurdle
By Mark Melin, Managed Futures Specialist
Author, High Performance Managed Futures
Email: markhmelin@yahoo.com

A little noticed but potentially significant benchmark in the assent of the managed futures industry may have taken place recently in meetings conducted at the office of industry self-regulator National Futures Association (NFA). Broad distribution of managed futures through a mutual fund structure, which at one point faced an uncertain future, appears to be moving forward.

When investing in managed futures through a traditional financial advisor, the uncorrelated asset class has typically been available only to institutional investors and high net worth individuals known as “Qualified Eligible Participants.” Offering managed futures through a mutual fund structure dramatically increases the distribution of the investment to “average” investors and “mainstream” financial advisors. The move by the NFA signals a willingness of regulators to accept the mutual fund distribution structure for the managed futures asset class.

At a recent meeting in Chicago, the NFA brought together top industry participants with divergent interests, from commodity pool operators (CPOs) to existing managed futures mutual fund operators, according to NFA Chief Operating Officer Dan Driscoll. With NFA encouragement, industry participants are said to have worked out differences and crafted recommendations on potential rule changes that will now go to the Commodity Futures Trading Commission (CFTC). It is the group’s hope that the CFTC, who writes final rules, will consider recommendations from the NFA and industry participants. The CFTC has not set a deadline on when this issue will be decided.

In 2002, changes to Securities and Exchange Commission (SEC) regulations allowed futures and options to be utilized in a mutual fund structure, which opened the door for managed futures strategies. At the time there was little relative interest in the asset class from traditional financial advisors, as the managed futures industry was still in its infancy, starting 2001 with $40.30 billion in assets under management, according to BarclayHedge. This was when a well known mutual fund company, Rydex, launched the first managed futures mutual fund, basing the trade execution and algorithms on the S&P Diversified Trend Indicator. With the current generally recognized need for investments uncorrelated to the performance of the stock market and economic prosperity, the managed futures mutual fund has received significant interest from traditional Wall Street. Assets have since grown to a reported $299 billion in the 2nd half of 2011, with managed futures strategies now becoming the largest individual hedge fund sector and Morningstar benchmarking the industry’s significance by creating a managed futures category for the first time in 2010.

Previous to the mutual fund, “average” investors could only work with a separate futures commission merchant (FCM) or their related sales partner the introducing broker (IB) to access what is known as a “direct” managed futures account. The direct account stands opposed to the “fund” account available through a financial advisor.

With recent action from the NFA it appears as though managed futures mutual funds may be moving forward, if ever so slowly. The opening of a more “retail friendly” distribution channel could have dramatic ramifications for the managed futures industry, moving it from a traditionally FCM-based business model to becoming incorporated in an equity product offering.

A New Alternative to Stocks and Bonds
WSJ.com
Managed futures made a name for themselves in 2008, notching a solid gain as the stock market took a sickening tumble. But at that time they were out of the reach of most investors, because they were available almost exclusively through partnerships with relatively high minimum investments and net-worth requirements. Now, a rapidly growing number of mutual funds make managed futures easily obtainable, and small investors are flocking to them.
http://jlne.ws/ofJfmd
**JK - A nice complement to Mark Melin's piece above.

Lead Stories

Managed futures still offer non correlation with traditional asset classes
By Beverly Chandler, Opalesque London
US retail investors have developed an appetite for managed futures on the evidence provided by Altegris Advisors Altegris Managed Futures Strategy Fund. The fund has raised $1 bn in its first 12 months. John Sundt, President and CEO of Altegris Advisor and Co-Portfolio Manager of the Altegris Managed Futures Strategy Fund explains that investors want strategies that do well in periods of crisis, what he calls 'crisis alpha'.
http://jlne.ws/pPn9dg
****DA: Precisely what CTAs have said all along. Read below for the "fair and balanced" rebuttal.

Debunking Myths About Managed Futures
Seeking Alpha
Their sales pitch: During periods of great future uncertainty -- though “future certainty” seems like an oxymoron, so translation, “during periods of investor anxiety about the markets" -- you should consider Managed Futures, which offer attractive returns in bull and bear markets and reduce risk by providing diversification. Sounds fantastic. I’ll take 2 please. Unfortunately, it’s not really that simple. It is time we take a closer look at the common misconceptions about Managed Futures and why investors today should simply pass on them.

http://jlne.ws/qj5z3F
****DA: Below the article are several responses from the CTA community. Quite entertaining.

Hedge Funds Add to Wagers in Biggest Rally of 2011: Commodities
Bloomberg
Speculators boosted their wagers on higher commodity prices for the first time in five weeks as increasing confidence that the global economy will avoid another recession spurred the biggest rally of the year. Money managers boosted combined net-long positions across 18 U.S. futures and options by 0.2 percent to 656,691 contracts in the week ended Oct. 11, Commodity Futures Trading Commission data show.
http://jlne.ws/oYSGNJ

Hedge Funds Pull in $6.1 Billion in August, Seventh Inflow in Eight Months. Fixed Income Hedge Funds Boast Best Returns and Heaviest Inflows
BarclayHedge
Hedge funds pulled in $6.1 billion in August, the seventh inflow in eight months, report BarclayHedge and TrimTabs Investment Research. Hedge funds hauled in a heavy $51.0 billion in the first eight months of 2011. http://jlne.ws/p5l6EG

Institutional investors looking for ways to squeeze yield out of cash
Pensions & Investments
Institutional investors are looking for more control over investments, including higher-yielding ways of putting cash to work by extending duration and taking more credit risk in segregated accounts, according to managers.
http://jlne.ws/o1GU50
**JK - Can you squeeze yield from a dollar? Yes, you can.

Eurekahedge Hedge Fund Index down -2.30 in September (-4.02 YTD)
Opalesque
Turbulent conditions and declining equity markets brought with them another month of negative returns for hedge funds in September. The Eurekahedge Hedge Fund Index was down 2.30%1 for the month, though it should be noted that the MSCI World Index fell nearly 10%2 during the same period. More than one-third of all the hedge funds that have reported to the Eurekahedge database for September were in positive territory for the month.
http://jlne.ws/n69RCz
**JK - CTA returns should be available in the next issue. In the meantime, the Newedge CTA index's YTD returns were -3.36%, with the MTD -2.02%.

Commodities teams hit hard by staff cuts
Tom Osborn, Rebecca Hampson and Giles Turner
Investment banks have begun cutting commodities teams in anticipation of sharp losses brought about by falling prices.
Sources close to Barclays Capital, Standard Bank, UBS and Societe Generale have said commodities-related staff have been axed from each bank in recent weeks.
Pau Morilla-Giner, a partner at fund manager London & Capital, said: “Investment banks are posting pretty dismal numbers for their trading departments, so pressure to reduce costs must be on big time. I hear about heads of desks at banks forced to reduce costs by 30% by year end.”
http://jlne.ws/r7tzGo

Managed Futures/Managed Funds

Commodity sell-off hits star hedgies' track records
Reuters
A sharp sell-off in commodity markets in the past few weeks is wreaking havoc with the track records of some of the biggest-name funds in the sector, many of which now languish near the bottom of the $2 trillion industry's performance tables.
http://jlne.ws/nEyvbl

Bank of America Merrill Lynch Introduces Two New Algos for Futures
Business Wire via Yahoo! Finance
Bank of America Merrill Lynch, a leading provider of automated trading tools, is pleased to introduce two new execution algorithms to meet the growing demand for its Futures trading suite: Ambush and Instinct.
http://jlne.ws/r4QkSd

New EF programme targets institutions
Hedge Fund Manager
EF Financial Services, a Mexico-based CTA manager, has launched a version of its managed account programme targeted specifically towards institutional investors. EF Xi debuted last month and adopts the same investment approach as the maiden EF X programme, but has longer trading periods, thereby reducing trading frequency.
http://jlne.ws/n4Aptl

ITG launches new suite of futures algorithms
Hedgeweek
Investment Technology Group, Inc has released a suite of algorithms for futures. The ITG futures algorithms are available via ITG's award-winning Triton® execution management system, through the ITG Matrix®front-end and API for derivatives trading, and also via FIX connection to ITG from third-party trading systems.
http://jlne.ws/plQYCZ

Q&A: Shinnecock Partners Head Bullish On Managed Futures
FINalternatives
Alan Snyder, founder and managing partner of Shinnecock Partners, started his Los Angeles-based fund 18 years ago but has only recently decided to market it to outside investors. He spoke with FINalternatives recently about that decision, the “über-principles” that guide Shinnecock’s investment process and the joys of managed futures.
http://jlne.ws/rmobDo

Anello Asset Management unveils Diversified Futures Program
Hedgeweek
Anello Asset Management (AAM), the independent alternative investment manager and specialist managed account provider, has launched its Diversified Futures Program (DFP) which has a six year positive track record, managed by the company’s newest recruit, Stuart Barron. The program is a multi asset managed account, following long term trends with a systematic, technically driven trading methodology. The program is mostly invested in commodity futures; including industrial and precious metals, energy and food.
http://jlne.ws/n13jBy

Merrill: Hedgies Reverse Course To Sell Nasdaq Futures, Buy Gold - Focus on Funds
By Murray Coleman - Barrons.com
Large managed futures funds, including hedge funds, in the past week moved to partially cover their S&P 500 futures while reversing to sell tech-heavy Nasdaq 100 futures and bought gold, according to an analysis by Merrill Lynch.
http://jlne.ws/osrj0e

The Best Alternative Investments
SmartMoney.com
The U.S. economy is all about finding alternatives. You can have Coke or Pepsi. Want to buy a car? You've got two-doors, fours-doors, SUVs, pickups and station wagons. Looking for something besides Jersey Shore to watch? There are at least 500 other cable channels to choose from. So even though it has taken a while, it's not surprising that "alternative" assets have become popular in our investment portfolios. This year folks have been buying up mutual funds that offer choices beyond buying and holding stocks. But out of the 269 mutual funds that research firm Morningstar throws into the alternative category, only about half have been around since the market crash of 2008. That means that while these newfangled funds have been pitched as a way to ride out a crashing stock market, there hasn't been a chance to prove that they actually work...until now.
http://jlne.ws/nS67ss
****DA: A nice plug for managed futures funds, which were relatively unscathed in the recent meltdown.

Managed futures soften impact of volatile traditional markets study claims
Opalesque
Last year’s survey of US institutions and financial advisers from Morningstar revealed that 66% of financial advisors believed that alternatives would become as or more important than traditional investments over the next five years. Investment managers Altegris report that financial advisors awarded top ranks to managed futures strategies as offering the greatest growth potential through 2015 amongst alternative strategies. In their latest White Paper, entitled 'Managed Futures: Is the Trend Your Friend?’ Altegris says: "The appeal of managed futures is that they have shown their ability to thrive in up and down markets."
http://jlne.ws/obXrJQ

Pensions & Endowments

N.J. pension fund to commit up to $1.49 billion
Pensions & Investments
New Jersey Division of Investments, Trenton, intended to commit up to $1.49 billion to new and existing private equity, real estate and hedge fund vehicles, according to presentations made by investment staff on Oct. 13 to the New Jersey State Investment Council meeting, confirmed spokesman Andrew Pratt.
http://jlne.ws/rh5IvZ

Institutional investors question fixed-income allocation
InvestmentNews
The poor outlook for fixed-income returns is pushing some institutional investors to consider more-active approaches to managing their fixed-income portfolios.
http://jlne.ws/qiRYSc

Pension funds need injections of opportunistic dynamism
By Mike Foster - Financial News
You need to tease out short-term opportunities to maximise returns over the long run, according to Mirko Cardinale, head of strategic asset allocation research at Aviva Investors. Aviva itself is a devout believer, given that £50bn of its in-house insurance funds and £850m of its clients’ money have started using his process, dubbed dynamic asset allocation. To achieve super-returns, Cardinale uses index futures and exchange-traded funds to take bets on bonds, equities and currencies whose value has strayed away from long-term fair value. Allocation changes are made once a quarter.
http://jlne.ws/p1BrQn

Regulation

The push-me pull-you of commodities regulation
FT.com
When US regulators finally vote to crack down on commodity speculators this Tuesday, Wall Street and some trading houses will likely win a partial reprieve.
The Commodity Futures Trading Commission’s plan to impose new “position limits” in 28 commodities from oil to sugar has been its most controversial, drawing more than 13,000 comments.
http://jlne.ws/pY5Zqd

EU May Impose Limits on Commodity Swaps, High-Frequency Trading
Bloomberg
The European Union may impose position limits for commodities derivatives and curbs on high- frequency trading as part of plans to overhaul the region’s financial-market rules.
The European Commission, the 27-nation EU’s executive arm, is seeking limits on the number of commodity derivative contracts “any given market members or participants can enter into over a specified period of time, or alternative arrangements” with the same impact, according to copies of proposals set for release on Oct. 20 that were obtained by Bloomberg News.
http://jlne.ws/nnEBeK

EU acts amid fears of energy markets abuse
By Joshua Chaffin - Financial Times
European ministers are expected on Monday to endorse new rules to curb potential abuses in the continent’s fast-growing energy markets, including insider trading.
The rules would explicitly forbid several forms of market abuse in power trading. They would also require those who trade gas and electricity to register with one of the European Union’s 27 member states and provide information about their transactions to authorities.
http://jlne.ws/poKLne

Most hedge funds to escape tighter oversight
FT.com
US regulators will examine non-bank financial groups with more than $50bn in assets to decide whether they are dangerous enough to merit tougher supervision and higher capital requirements – a threshold that will be a relief to most hedge funds and private equity firms.
http://jlne.ws/plNFO8

Regulator wins round 2 in landmark pensions case
By Mark Cobley - Financial News
The UK government is a little closer to a full-blown political nightmare over unpaid pensions today, as the Court of Appeal backed a £2.2bn demand by the country's Pensions Regulator against the bankrupt firms Lehman Brothers and Nortel Networks.
http://jlne.ws/pSwnqP
****DA: UK law puts underfunded pension liabilities ahead of all other financial liabilities. I bet municipalities in the U.S. are keeping a close eye on this one.

Why solvency for pensions would be a dreadful mistake
By William Hutchings - Financial News
Bat it away though they may, pension schemes cannot afford to stop worrying about the risk of Brussels imposing on them a solvency regime that would hamper their ability to meet their long-term liabilities. Many defined benefit pension scheme managers quite rightly feel threatened by regulatory developments. Top of the list of worries for many of them is the possibility that the European Union will impose a solvency regime on pension schemes, restricting their freedom to invest in risky assets, similar to that of Solvency II, a directive aimed at insurers.
http://jlne.ws/prtr1K
****DA: Stagnant stock market, bonds paying a two percent coupon, and higher-yielding assets deemed "too risky." Good luck with those long-term liabilities.

Carried interest tax increase may come to pass this time
Pensions & Investments
Money managers have fended off past attempts to increase the tax on carried interest, but they're now on high alert as a required $1.2 trillion in federal deficit cuts makes such a proposal more likely than ever. http://jlne.ws/r45eua

NFA revokes registration of commodity trading advisor, William S. Scott
NFA
National Futures Association (NFA) has revoked the registration of William S. Scott of Miami, Florida. Scott is a Commodity Trading Advisor and is the sole principal and associated person (AP).
http://jlne.ws/rqN8gp

JLN Managed Futures: October 3, 2011

noreply@blogger.com (Jim Kharouf) — Mon, 03 Oct 2011 17:37:00 +0000

Observations - Statistics - Commentary

Jay Feuerstein - 2100 Xenon [INTERVIEW]
Jay Feuerstein is chief executive officer and chief investment officer of 2100 Xenon, the managed futures affiliate of Old Mutual Asset Management. From January through August 2011, its managed futures program was up 13.83 percent, while its Global Long/Short Fixed Income program rose 8 percent, outpacing the BarclayHedge CTA Index, down 0.51 percent through August. JLN Managed Futures editor Jim Kharouf spoke with Feuerstein about 2100 Xenon, market volatility, challenges in the CTA space and where his firm got its name.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance.

Editor’s Note:
This month marks our own “operation twist” for the managed futures newsletter. We are returning to a bi-monthly format, which was our original frequency for the publication when we launched it in January 2010. The content is still firmly focused on the managed futures space and we’ve also added a new section on institutional investors, with an eye toward helping CTAs and institutional investors bridge the gap. If you have information you’d like to include or suggestions to improve the Managed Futures newsletter, please contact editor Jim Kharouf at jimkharouf@johnlothian.com or dougashburn@johnlothian.com.

Notes from CTA Expo Chicago
JLN Managed Futures attended CTA Expo Chicago on September 13. The sold-out conference brought together the buy-side, the sell-side, vendors, and platforms from all over. Hosts Bucky Isaacson and Frank Pusateri put together a well-rounded group of panelists and speakers, including NFL Hall of Fame defensive back turned private equity manager Ronnie Lott. Speakers covered many topics of relevance to CTAs, including targeted marketing, the role of emerging managers in a portfolio, and European marketing overview (a regulatory nightmare, even compared to Dodd-Frank). Speaking of regulatory overviews, Dan Driscoll from the NFA offered a “State of the Regulatory Environment” presentation. On April 19, 2012, the CTA Expo will be at the NYMEX building in New York. And on June 28, CTA Expo will be in London at the Mayfair Hotel. Bucky and Frank’s roadshow is growing. Congrats.
http://jlne.ws/rj3uYn

Event: MarketsWiki Questions: Exploring Financial Technology
October 5, 2011, 4:30 p.m. - 6 p.m., IIT Stuart School of Business
http://jlne.ws/oHRGmC

Lead Stories

Managed Futures Gain 0.16% in August; Currency Traders Give Up 0.89%
BarclayHedge
Managed futures gained 0.16% in August according to the Barclay CTA Index compiled by BarclayHedge. Year-to-date, the Index remains down 0.51%.
http://jlne.ws/nXtIXF

AHL strength a positive for Man Group
FT.com
For Man Group’s flagship fund AHL – the largest computerised hedge fund in the world – the past three months have brought rich returns.
http://jlne.ws/rjN98M
**JK: The good news for Man

Man Group outflows surge, shares slump
Reuters
Man Group (EMG.L), the world's largest listed hedge fund manager, said clients withdrew money over the summer months at the fastest pace since early 2009 amid "relentless volatility" in world markets, knocking its fragile recovery. Man Group shares traded 19.3 percent lower at 193.4 percent at 1131 GMT after the firm said clients pulled out a net $2.6 billion in the three months to end-September, with its GLG unit particularly suffering."
http://jlne.ws/rkDkWf
**DA: And the bad: Alpha Select fund down 13.7 percent; European Opportunity fund down 12.4 percent; Emerging Markets fund down 14.7 percent. Diversified losses.

Man Group doubles planned job cuts
FT.com
Man Group, Europe’s largest hedge fund manager, has doubled the number of job cuts it intends to make by early next year as part of a cost-cutting drive.
The company – the biggest hedge fund firm in the world in terms of number of employees – now plans to have cut one in five jobs, or about 400 employees, by the first quarter of 2012."
http://jlne.ws/opvXEp

Analysis: Fed's twist moves hurts company pension plans
Reuters
BlackRock, which oversees $3.7 trillion for pension funds and other investors, is urging many of its corporate pension plan clients to match assets and liabilities more closely, in part by shifting money from equities to bonds.
But with the funding ratios and bond rates so low, the matching programs should be phased in over several years, Andy Hunt, managing director at BlackRock in New York, said. "Pension plans need to learn the lessons of the past few years and set themselves on the right course for the future," Hunt said.
http://jlne.ws/oRuRWu
**JK - Opportunity knocks for managed futures here.

Institutional investors get active in search for fixed-income returns
Pensions & Investments
The poor outlook for fixed-income returns is pushing some institutional investors to consider more active approaches to managing their fixed-income portfolios.
http://jlne.ws/qYvEBN
**JK - More in pensions/institutions section below.

Cowen Group Launches Managed Futures Mutual Fund
FINalternatives
The new fund is managed by William Marr, president and CEO of Ramius Trading Strategies, and Alexander Rudin, RTS director of research. Both are Merrill Lynch vets: Marr worked there from 2006 to 2009 as the global head of hedge fund research and portfolio construction while Rudin, during the same period, was a Merrill Lynch senior investment analyst, overseeing more than $4.5 billion in managed futures assets.
http://jlne.ws/pvEupl

Smaller Hedge Funds Can Outperform Bigger Ones
Institutional Investor
The study found that in 2010 young funds — defined as those two years old or less — outperformed midage funds (two to four years old) and tenured funds (older than four years). They returned 13.25 percent, 12.65 percent and 11.77, respectively.
http://jlne.ws/oiJC2E
**JK - Interesting. Nothing in here on managed funds, but one wonders if the trend holds true there as well.

Looking at an Ink Blot, Seeing a Green Light
AllAboutAlpha
Soon after the end of the First World War, psychologist Hermann Rorschach invented a psychological test based on the idea that people will project their unconscious drives onto an inkblot. Ongoing debates over speculation, especially in the commodity markets, have much the same character. Such facts as are known present no unambiguous picture. Instead, they allow for a lot of projection.
http://jlne.ws/nAfh1I

Turmoil trumps regulation in buy-side woes
The TRADE Poll | The Trade News
Front of mind for buy-side traders are concerns over renewed market turmoil in an unstable macro-economic climate. But worries over regulatory change are not far behind.
More than half those surveyed (54%) in September’s poll on TheTRADEnews.com, voiced anxiety over the uncertainty that a return to August’s levels of market volatility might cause."
http://jlne.ws/piAYub

Managed Futures/Managed Funds

Hedge-Fund Strategies for the Masses
Barrons
"ETF operators are bringing hedge-fund strategies to the masses with the launch of a dozen alternative-investment exchange-traded funds in recent years. So far, these funds, including WisdomTree Managed Futures Strategy Fund (ticker: WDTI), Credit Suisse Merger Arbitrage Liquid Index ETN (CSMA) and Cambria Global Tactical ETF (GTAA), have attracted about $790 million in assets, according to Morningstar. (ETNs, or exchange-traded notes, trade like ETFs.)
That's a drop in the bucket compared with the $2 trillion hedge-fund industry, but if the stock market remains choppy, investors may increasingly look to these low-correlation—and low-fee—instruments to protect and preserve their assets."
http://jlne.ws/pJ4deQ

Merrill: Hedgies Sell Gold & Silver; Buy Nasdaq, Emerging Markets
Barron’s
Large managed futures funds, including hedge funds, reversed in the past week to buy tech-heavy Nasdaq futures while continuing to cover short bets against the S&P 500 and sell precious metals across-the-board, according to an analysis by Merrill Lynch. In terms of overall trends for all types of hedge funds and managed futures funds, Merrill found that in the week ended Wednesday (I’m adding some ETF tickers for illustrative purposes):
http://jlne.ws/qlsTl0

Exclusive: Metals fund Red Kite flies high as copper crashes
Reuters
It was a long wait, but the world's most renowned metals traders Michael Farmer and David Lilley are finally profiting from a big, bearish bet on copper, trouncing rival hedge funds with a nearly 50 percent gain this year. The $1 billion Red Kite Metals fund has returned close to 20 percent for each of the past two months as copper prices fall to their lowest in a year, industry sources familiar with the fund's positions told Reuters. That would comfortably rank it among the best-performing commodity funds this year.
http://jlne.ws/rjLORU

Hatteras Alpha Hedged Strategies Fund Offers Institutional Shares and Allocates to Managed Futures
MarketWatch
Hatteras Funds, a provider of unique alternative investment solutions for financial advisors and their clients, has announced two enhancements to the Hatteras Alpha Hedged Strategies Fund (ticker:ALPHX), a multi-strategy, multi-manager alternative mutual fund offering daily liquidity and position level transparency.
http://jlne.ws/rneXOO

Commodity Fund Touradji Capital Management Faces Shake-Up
WSJ.com
Amid a difficult year for many commodity funds, the Global Resources fund is down 17.4% through August, net of fees, according to a document prepared for investors, thanks in part to losing bets on base metals. The HFRX Commodity Index of commodity hedge funds was down 2.1% through the end of July, according to Hedge Fund Research Inc. Data through August weren't available.
http://jlne.ws/qf5rDs

Star hedge fund Winton hits $25bn
City A.M.
THE hedge fund run by star trader David Harding has defied the industry’s poor performance this year to make returns on investments of around 6.3 per cent so far.
http://jlne.ws/n9ps5o

The D. E. Shaw Group Awarded Advisory Mandate by Vanguard
MarketWatch
The D. E. Shaw group announced today that The Vanguard Group ("Vanguard") has awarded the D. E. Shaw group's institutional asset management business, D. E. Shaw Investment Management, L.L.C. ("DESIM"), a mandate to assume investment advisory responsibilities for a portion of Vanguard's $4.3 billion Growth and Income Fund.
http://jlne.ws/qXkn9P

Pensions/Institutions

Memo To Pension Managers: Help Is On The Way!
AllAboutAlpha
The Managed Funds Association has published a paper by Everett Ehrlich, a former U.S. Under Secretary of Commerce, that seeks to quantify the contribution that investment in hedge funds of up to 10 percent of their portfolios could make to the performance of certain hard-pressed institutional investors. The paper has a rather dormative title, “The Changing Role of Hedge Funds in the Global Economy.” The content is more intriguing than the title, though. Ehrlich, who holds a doctorate in economics from the University of Michigan, maintains hedge funds could play a major role in rescuing state and local pensions from the avalanche that has nearly swamped them of late."
http://jlne.ws/pJjXYg
**From the article: “Pensions have played a part, then in the transformation of hedge funds from elite to a mass phenomenon. Will hedge funds return the favor by rescuing the pension funds?”

Japanese Institutions Increase Hedge Fund Allocations
FINalternatives
The survey showed Japanese pension funds are increasing their hedge fund allocations—the average allocation among the pension funds surveyed was 21%.
Equity long/short was the strategy of choice in 2010/2011, but looking ahead to 2011/2012, global macro/managed futures has the edge.
http://jlne.ws/mOzHiJ

World’s Biggest Pension Fund Plans to Start Investing in Emerging Markets
Bloomberg
Japan’s public pension fund, the world’s largest, will start investing in emerging market stocks by the end of the year as it diversifies assets to maintain stable returns.
The Government Pension Investment Fund, which oversees 114 trillion yen ($1.5 trillion), is in the final stage of deciding the managers who will handle the investments, said Takahiro Mitani, president of the fund, known as GPIF. The investments will be focused on markets included in the MSCI Emerging Markets Index, he said.
http://jlne.ws/qMqrtU

Report author: Radical changes are needed to protect taxpayers
LahontanValleyNews.com
Defined benefit plans create long-term liabilities for states and taxpayers, while defined contribution plans carry no such risk. Because of this, and the concern over the health of public pension plans nation wide, there is a growing chorus of groups advocating for the change.
http://jlne.ws/odOOd4

Why Irish companies are facing massive deficits in pension funds
Independent.ie
The collapse in global financial markets, with the London FTSE index down 15pc and the American S&P index falling by 12pc since the middle of the year, will be causing severe unease in many Irish boardrooms. After a period when it seemed as if Ireland's major companies were getting to grips with their pension fund deficits, the crash of 2011 is threatening to undo all of their recent good work.
http://jlne.ws/nrhtsp

Regulation

Commodity markets: Back to the futures
The Economist
Regulators are homing in on new rules to rein in speculators. In a speech to European policymakers in June Nicolas Sarkozy, the French president, encouraged his audience to be serious about “fighting the mafia”. He was not referring to a French Tony Soprano, but rather that other breed of criminal: commodity speculators, whom many politicians on either side of the Atlantic blame for dramatically pushing up the price of oil and food and contributing to volatility.
http://jlne.ws/qnZGFU

Critics say tax plan will penalize investors
By Jeremy Grant, FT.com
The European Commission’s proposed legislation for a tax on financial transactions is the first concrete effort by any large jurisdiction to tax equities, forex forwards options and derivatives – on and off exchanges – for years. In the US, the Chicago futures exchanges have lobbied successfully for years to keep the idea off the agenda in Washington. But the idea now looks set to gain traction in Europe, where political clamour for fresh ways to raise tax revenues is intense."
http://jlne.ws/oy0bI5

CFTC Position Limits And ETFs
By Paul Baiocchi, Index Universe
A wave of new position limits on commodities futures contracts is forthcoming, and ETF investors need to take note. For those of you who own commodity ETFs, the looming regulation from the Commodity Futures Trading Commission could have a dramatic impact not only on the nature of your portfolios, but the risks associated with it.
http://jlne.ws/nuREf7
**DA: The first rule of new swap rules: we are “swapping” one set of problems for another.

Regulators Delay Position Limits, Again
NYTimes.com
Federal rules set to rein in speculative commodities trading face further delays, as regulators struggle to finalize the controversial proposal amid threats of legal challenges. The Commodity Futures Trading Commission decided on Tuesday to push back an Oct. 4 meeting during which the agency had been scheduled to vote on the rules. The commission’s chairman, Gary Gensler, is expected to notify his fellow commissioners that the agency is likely to take up the proposal on Oct. 18."
http://jlne.ws/ngjcXV

Jay Feuerstein - 2100 Xenon [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Mon, 03 Oct 2011 14:45:00 +0000

Jay Feuerstein is chief executive officer and chief investment officer of 2100 Xenon, the managed futures affiliate of Old Mutual Asset Management. From January through August 2011, its managed futures program was up 13.83 percent, while its Global Long/Short Fixed Income program rose 8 percent, outpacing the BarclayHedge CTA Index, down 0.51 percent through August. JLN Managed Futures editor Jim Kharouf spoke with Feuerstein about 2100 Xenon, market volatility, challenges in the CTA space and where his firm got its name.

Disclaimer: Futures and options trading involve risk. Past results are no indication of future performance.

JLN Managed Futures: September 1, 2011

noreply@blogger.com (Ryan Lothian) — Fri, 02 Sep 2011 02:13:00 +0000

Observations & Commentary

James Bibbings - Turnkey Trading Partners [INTERVIEW]
MarketsWiki.tv

James Bibbings founded Turnkey Trading Partners to provide support services to managed futures and hedge fund clients, offering a variety of services including: regulation, risk management, accounting, marketing and education. A former supervising auditor with the National Futures Association (NFA), Bibbings spoke with JLN Managed Futures Newsletter editor Jim Kharouf about challenges, regulation and the outlook for managed futures.

Lead Stories

Liquidity strength in CTAs
Financial Standard
Global hedge fund of fund investment firm, Financial Risk Management (FRM), finds liquidity and diversity in CTAs with volatility support in current alternative markets. FRM has introduced weekly liquidity for its Sigma Fund, which invests in a globally-sourced portfolio of Commodity Trading Advisers (CTAs) that specialise in managed futures.
http://jlne.ws/nIUsoP
**”If fundamental forecasting is the key driver of most of your investments, you are not diversified." - FRM Australia managing director Richard Keary.

Shinnecock Named Best Managed Futures CTA Fund at World Finance Hedge Fund Awards
HedgeCo.Net
Los Angeles-based hedge fund firm, Shinnecock Partners, has been named Best Managed Futures CTA Fund in North America by World Finance magazine as part of its annual Hedge Fund Awards.
http://jlne.ws/r2fS6m

EurekaHedge: Hedge funds outperformed global markets by 3.03%
Hedge Fund News From HedgeCo.
The hedge fund industry saw US$25 billion inflows and US$20.7 billion outflows during July" http://jlne.ws/ps9TTe

Black box hedge funds profit in volatile markets
Reuters
Insiders say so-called managed futures funds, which try to latch onto market trends, are making money from declining bond yields and falling equities, as investors seek safe havens amid the eurozone debt crisis and after the U.S.'s credit rating downgrade.
http://jlne.ws/piKbnD

Paulson fund extends August losses
Financial Times
John Paulson, one of the world’s most successful hedge fund managers, has extended losses throughout August to leave his flagship fund down almost two-fifths for the year. His Advantage Plus fund was down 38.7 per cent for the year as of Friday, according to a person familiar with the fund’s performance, having lost 22 per cent in the first 19 days of the month.
http://jlne.ws/ouBP0t
**DA - You win some; you lose some. How many more months until Paulson becomes a Cubs fan?

Paulson & Co’s flagship Advantage Plus Fund posts 21.6% loss
HedgeTracker
John Paulson’s hedge fund manager Paulson & Co.’s flagship Advantage Plus fund has been one of the most publicly scrutinized hedge funds in the industry in the past few months, and has continued its poor performance with a 4.6% loss in the month of July. According to the Financial Time, the Advantage Plus hedge fund is down 21.6% through July, while the Paulson Advantage fund is down 15% through the same period.
http://jlne.ws/qfvcXS

How Badly Will The Gold Dive Hurt John Paulson
Institutional Investor
Is gold a bubble that is finally bursting? This is the big question on Wall Street after the metal dropped $104, or 5.6 percent, on Wednesday. It is down more than 7 percent after hitting an all-time high on Monday.
http://jlne.ws/oUJGWT

Aspect diversified: aspect capital
Hedge Funds Review
Learning to react to endless technological advances, from the commercialisation of the internet to more recent developments in trade execution, has enabled Aspect Capital’s managed futures hedge fund, the Aspect Diversified Fund, to become “incredibly responsive to market moves,” asserts CEO Anthony Todd.
ttp://jlne.ws/nslFga
**JK - Net cumulative performance on the fund, since its inception in 1998, is 251.69%. Wow.

Volatility hedge funds outperform on the back of market turmoil
HedgeTracker
Volatility hedge funds, the niche hedge fund strategy that focuses on using options to bet on price fluctuations in securities, have been the only positive performers in the European hedge fund market. According to an article on Bloomberg, volatility hedge funds rose 5.1% through June 2011 while their European counterparts in every other strategy floundered.
http://jlne.ws/oOeOuK

How A Hedge Fund Reacts To A Hurricane: Trade Weather Derivatives!
Hedge Fund News From HedgeCo.Net
While others were stockpiling water, flashlights, and board games in preparation for Hurricane Irene, the hedge fund Tudor Investment was crunching numbers. Paul Tudor Jones’ investment firm employs a weather derivatives analyst.
Weather derivatives are fairly new, the first one traded in 1997 and the CME introduced the first exchange-traded weather futures contracts in 1999.
http://jlne.ws/qLWB4k
**JK - Who said evacuate? I’m staying put and tradin’ this thing out.

Managed Futures/Managed Funds

Hedge Funds Boost Bullish Agriculture Bets as Corn, Soy Yields May Slump
Bloomberg
Speculators increased bullish bets on agricultural commodities to the highest level since early May after adverse weather eroded yield prospects for corn and soybean crops in the U.S., the world’s top grower and exporter. Funds became bullish on wheat for the first time since June and wagers that soybeans will gain rose 64 percent.
http://jlne.ws/oovlmm
**DA - Hot, dry summer + cheap money = pile on.

Managed Futures Funds Shine In August Rout
FINalternatives
Managed futures hedge funds are making out quite nicely amidst the market carnage this month. "Black box" funds are up 4.2% this month, Hedge Fund Research data shows, almost a mirror image of the average hedge fund, which is down 4% on the month.
http://jlne.ws/oGANWQ

Little known hedge fund strategy now on the radar
FT.com
Event-driven is one of the least recognised hedge fund strategies and yet, over the long term, 25 per cent of hedge fund assets are allocated to it. Its diversification benefits from mainstream indices are the principal reason for its prevalence in hedge fund portfolios.
http://jlne.ws/qWSrUI

Managed money cuts gold length, copper turns short
Reuters
Managed money in gold futures and options reduced their net length for a third straight week, while positions in copper turned net short for the first time since late 2009 in the week ended Aug. 23, latest data from the U.S. Commodity Futures Trading Commission showed.
http://jlne.ws/nMz1H6

International Asset Management Favors Event-Driven Strategies
Money Marketing
IAM has a neutral view of other hedge fund strategies but feels macro and CTAs have the highest risks. Within CTAs, a strategy that involves trading in commodity, futures and foreign currency markets, IAM favours medium to long-term trend followers.
http://jlne.ws/pxyvaL

Man Group snags Goldman Sach’s Jonathan Sorrell
HedgeTracker
Man Group has reportedly hired Jonathan Sorrell away from Goldman Sachs. According to the New York Times, Mr. Sorrell previously headed up Goldman’s Petershill fund, a private equity fund that invests in and seeds hedge funds. Sorrell will join Man Group as the hedge fund behemoth’s Head of Strategy.
http://jlne.ws/riiDaK

Disco Aside: Are the 1970s Returning for Commodity Investors?
AllAboutAlpha
On August 11, Credit Suisse’s Asset Management Division issued a new white paper, “Commodities Outlook: Increased Volatility, Increased Opportunity?” This paper takes the long view of the issue of returns on commodities, taking us back to the 1970s – not to commune with our inner John Travolta or Donna Summer, but in order to show the secular ebbs and flows both of volatility and of excess return in commodities. This white paper takes the view that in the 1970s a commodity excess return strategy – a strategy aimed at making use of a basket of commodities to average out their yields — would have worked wildly well.
http://jlne.ws/p4Lfs7
**DA - CTAs are shaking the mothballs out of their leisure suits.

Pimco Launches Hedge-Fund-Like 'Go Anywhere' Bond Fund
WSJ.com
Pacific Investment Management Co., the big money manager founded by Bill Gross, is wooing investors with a new bond fund that aims to provide returns in any market environment with a broad range of fixed-income strategies.
http://jlne.ws/ofg0G5
**JK - I’m not sure this is the best name for a product as it rises, falls, goes flat. Actually, I take it back. Good name.

Pimco's Gross Has 'Lost Sleep' Over Bad Bets
WSJ.com
In recent weeks, Pacific Investment Management Co. founder Bill Gross says he has "lost sleep" over an ill-timed bet on Treasurys.
http://jlne.ws/pbUd1m

Overlaying Strategies in Managed Futures: Does it Help an Investor?
Shore Capital Management LLC
Discussing this topic of overlaying strategies really gets to the heart of one question that keeps reappearing, “why are CTAs non-correlated to equities?” This is a very simple question to ask and is asked with high frequency. But the answer includes many topics to properly answer it. As Matt Davio recently stated, it’s the “special sauce” in understanding managed futures. One of the topics of the special sauce is the utilization of overlaying strategies.
http://jlne.ws/pghU6E

ALTIN Fund of Hedge Funds announces Half Year 2011 Performance
Hedgeweek
n the first half of the year, ALTIN – the USD270m multi-strategy fund of hedge funds listed in the London and Swiss stock exchanges – was able to protect its investors' portfolios, according to the firm's performance figures for the first six-months of 2011.
http://jlne.ws/mQzgiK

Regulation

Regulators hand private funds extra time on Dodd-Frank
Financial News
Private funds, or those that cannot market to the public, have been granted an extension to comply with a part of the Dodd-Frank act that will require them to register with the US Securities and Exchange Commission and subject them to reporting requirements.
http://jlne.ws/nIASqg
**DA - The good news is the compliance extension until March 2012. The bad news is the SEC’s extended reach into non-U.S. domiciled funds and fund managers.

CME's Donohue rejects Dodd-Frank Act, urges delay on law's start
Crain's Chicago Business
CME Group Inc. is amping up its campaign against the Dodd-Frank Wall Street Reform Act, with CME CEO Craig Donohue blasting regulatory changes and calling for delays to the law's implementation.
http://jlne.ws/p9XEYK

Hedge funds face second surge of us regulation
Hedge Funds Review
A second wave of proposed rules from the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) may overwhelm the already-stretched compliance resources of many hedge funds. Hedge funds are most concerned about the SEC’s plan to introduce a reporting form to collect systemic risk information from registered hedge fund managers. The proposed Form PF runs 40 pages long and seeks detailed disclosures from hedge fund managers on their trading positions and risk profile.
http://jlne.ws/oC7CGZ

James Bibbings - Turnkey Trading Partners [INTERVIEW]

noreply@blogger.com (Ryan Lothian) — Thu, 01 Sep 2011 02:38:00 +0000

James Bibbings founded Turnkey Trading Partners to provide support services to managed futures and hedge fund clients, offering a variety of services including: regulation, risk management, accounting, marketing and education. A former supervising auditor with the National Futures Association (NFA), Bibbings spoke with JLN Managed Futures Newsletter editor Jim Kharouf about challenges, regulation and the outlook for managed futures.