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October 2011

JLN Managed Futures: October 17, 2011

October 18, 2011 by Ron Sebonia   Comments (0)

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

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no title

October 3, 2011 by Ron Sebonia   Comments (0)

October 3, 2011

Observations - Statistics - Commentary

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

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Jay Feuerstein - 2100 Xenon [INTERVIEW]

October 3, 2011 by Ron Sebonia   Comments (0)

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.

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