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March 2012

JLN Managed Futures - March 15, 2012

March 15, 2012 by Ron Sebonia   Comments (0)

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.

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

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.

**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.

Investment niche expands in agricultural commods
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.

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?

**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.

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.

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

Hedge Funds Trim Bullish Commodity Bets
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.

CFTC PRECIOUS METALS: Funds Grow Bearish On Precious Metals
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.

Man launches actively-managed global commodities fund
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.

Forward Launches Managed Futures Fund
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.

**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.

**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
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.

Hedge Fund Study: Improved Environment for Managed Futures and CTAs
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.

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.

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.

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.

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.


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.

**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
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.

**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

**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
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.

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Managed Futures Newsletter, March 1, 2012

March 6, 2012 by Ron Sebonia   Comments (0)

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.
**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
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.
**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
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.
**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
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.
**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
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.

Hedge fund, CTA and private equity investors to increase allocations in 2012
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.

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.
**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
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.
**JK - Man reported $59.5 billion in AUM at the end of February.

Pension Pain Mounts, Low Rates Boost Liabilities
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.
**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.

Managed Futures, Managed Expectations
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.

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.
**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.

SunGard launches Hedge360
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.

Managed Futures/Managed Funds

Managed futures' performance fees lurk in loophole
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.
*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 -
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.
**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).
*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.

UBP to Acquire Hedge Fund Manager Nexar Capital Group
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.

Why CitiGroup Hid Its Hedge Fund Numbers
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.

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%.
**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.
**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.
**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
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.
**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.
**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.
**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.


CFTC Final Rule: Registration and Compliance Obligations for Commodity Pool Operators and Commodity Trading Advisors
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
**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
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.

Regulators likely to delay start date of Volcker rule
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.

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Managed Futures Newsletter, February 14, 2012

March 6, 2012 by Ron Sebonia   Comments (0)

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.
**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
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.

What Were They Thinking? From MF Global to Raj & Bernie to LTCM
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.

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.
**Top Large firms include: Briarwood Capital, Winton Capital, P/E Investments and Blackwater Capital.

A Secretive Hedge Fund Legend Prepares to Surface
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.
**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.

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.
**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.

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.

Credit Suisse Launches CS Multi-Asset Futures Strategy Index
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

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

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.
**DA: In December, TCDRS put $175 million into Winton Capital's managed futures fund.

Average College Endowment Performance Improves and Size Matters

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.

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.

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.
**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.

Pension Funds Get Queasy over Private Equity
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.


CFTC Final Rule: Registration and Compliance Obligations for Commodity Pool Operators and Commodity Trading Advisors

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.

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.
**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
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.

Volcker Rule Faces Critics as Effective Date Nears
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.

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.”
**DA: And Congressmen should not be allowed to trade on inside information.

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Max Eagye - Altegris [INTERVIEW]

March 1, 2012 by Ron Sebonia   Comments (0)

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,, 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.

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