Alternative Links: Asset Flows

“And after six months of strong results after years of underperformance, managed futures strategies (which make bets on commodities and other futures contracts) [brought in] $4 billion in January alone.”

As Hedge Fund Returns Falter, Money Continues to Flow In – (The New York Times)

Performance:

2015 is unlikely to be another 2009 – (CTA Intelligence)

Macro Hedge Funds:

Macro Hedge Funds “Stinking Up The Joint” – (Barry Ritholtz)

Crude Oil:

Emil Van Essen Explains “Volatile Two Way Markets” – (Wall Street Journal)

Commodities explained: Hedging oil volatility – (FT)

Brent below $60 on US crude build, Saudi sees recovery – (CNBC)

Industrial Metals:

London Metal Exchange to Improve Warehouses to End Aluminum Bottlenecks – (Wall Street Journal)

Attain & RCM Join Forces:

RCM Alternatives and Attain Capital Management to Join Forces – (Futures Magazine)

How RCM uses education to build business in alternative investments – (Chicago Tribune)

Making It Attainable: RCM Buys Attain To Broaden Managed Futures Reach – (John Lothian)

Attain and RCM to Join Forces! – (Attain’s Alternatives Blog)

Attain and RCM to Join Forces!

What type of person are you?  Cooperative or Combative?

We’re told the futures markets are a zero sum game, where one person’s gain is another’s loss. And for much of our history at Attain, we’ve operated our business in that manner, with heads down and work ethic up – combating against others in the space to earn investor’s trust and ultimately their business. But does it need to be so fragmented and combative, we asked. What if we could do more together, than separately as competitors? What if the cliché is true, and the whole really is greater than the sum of the parts.

RCM AlternativesThese questions and more led us to enter into talks with the good folks at RCM Alternatives, a while back. And the more we talked, the more we liked everything they were doing. From live educational events around the country, to a 24 hour execution desk and back office support to help CTAs managing client accounts. The feeling was mutual, and we’re happy to announce today that we’ve entered into an agreement to join forces RCM Alternatives. You can view the press release here.

Rest assured things will be business as usual for clients of Attain, clients of RCM and fans of this blog, with everyone involved still involved, and our musings here continuing on for as long as there’s futures markets and professionals trading them. But this also affords us the opportunity to show our great appreciation to all who’ve made Attain what it is over the years. We couldn’t have done it without you (and won’t be able to moving forward either…remember, we’ll all still be at the combined company).

We’re excited about this new chapter, what it will mean for our efforts on this blog, and elsewhere spreading the word about the benefits and risks of alternative investments, the methods of accessing them, and all of the players involved; not to mention the next generation of investor focused tools, research, content, and unique products we’ll be looking to launch together.

We looked in the mirror, and found we’re really cooperative folks, after all. Here’s to cooperation and the bright future ahead!

Asset Class Scoreboard Two Months In

In a “business as usual” market environment with new all time highs in the stock market indices over the past year, it’s fun to play the game, which asset class has done the best since the beginning of the year or over the past twelve months. You might be surprised as to who’s on top and who’s not.

Asset Class Scoreboard Table Feb 2015Asset Class Scoreboard Chart(Disclaimer: past performance is not necessarily indicative of future results.)
Source: All ETF performance data from Morningstar.com
Sources: Managed Futures = Newedge CTA Index, Cash = 13 week T-Bill rate,
Bonds = Vanguard Total Bond Market ETF (BND),
Hedge Funds= IQ Hedge Multi-Strategy (QAI)
Commodities = iShares GSCI ETF (GSG);
Real Estate = iShares DJ Real Estate ETF (IYR);
World Stocks = iShares MSCI ACWI ex US Index Fund ETF (ACWX);
US Stocks = SPDR S&P 500 ETF (SPY)

Weekend Reads: The Next Recession

Market Commentary:

When Will The U.S. Have Its Next Recession? – (A Wealth of Common Sense)

The S&P 500 Vix Standoff – Part 2 – (Dana Lyons)

Don’t Make the Trading Gods Laugh – (Barry Ritholtz)

Hedge Funds:

Preqin Investor Outlook Hedge Funds Quarter 1 – (Preqin)

Regulation:

Industry renews CFTC position limits concerns – (Argus)

Asset Allocation:

Asset Allocation Strategies with Meb Faber – (Bason Asset Management)

Chicago:

Chicago – A Bird’s Eye View – Chiberia Returns (Soaring Badger)

Moody’s downgrades Chicago’s debt rating – (Chicago Tribune)

Science:

Gigantic Black Hole Discovered From the Dawn of Time – (National Geographic)

Just for Fun:

Why February 26th Will Go Down in Social Media Internet History — (Innovative)

Disclaimers – (Reformed Broker)

Illinois Rep. Aaron Schock in trouble for misusing campaign funds – (The Daily Show)

House of Cards – Spacey’s southern Accent – (VOX)

FCC votes for net neutrality, a ban on paid fast lanes, and Title II – (Arstchnica)

 

9 Markets in Backwardation and Contango

At the beginning of the year, we came out with some serious and some not so serious suggestions to play the Crude Oil inevitable rebound, one of them included buying a contract 12 to 18 months out instead of trying the ever so popular oil ETF $USO.

The ideas of contracts at different months with different prices, expiring on different days is something our equity market friends aren’t that familiar with. Let’s take Crude Oil for instance. If one was to buy an April 2015 contract, it would be priced at 49.28, compared to a contract set to expire in September of 2015 priced at 58.00. For a more visual display of such a difference, here’s the price difference of contracts every 6 months (March ’15, September ’15, February 2016, and July ’16). For the most part the contracts trade at the same level until these become the front month contract, and in so, become the most liquid contract to trade.

Crude Oil 6 months(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Barchart

This is just one of many ways to chart the differences in prices of contracts by month. Charting out the price difference by months chronologically would display what’s called a “price curve.” This curve is actually incredibly important to some managed futures strategies because some of their strategies are based solely if a market’s price is higher or lower in the further out months. We in the biz like to use the phrases Backwardation and Contango. Back in 2013, we went into detail on the definitions of the two, but the Sparknotes version is that a downward sloping price curve (further out prices are lower than current/nearer prices) is called backwardation and that an upward sloping curve where prices are higher and higher the further out in time you go is called Contango.

Simple enough. But here’s where things get a little tricky. If the market is in Contango, the investors in ETFs following that market typically see underperformance from that market structure itself. This is because the ETF has to pay the roll yield, which means they have to sell the contract before it expires at the lower price and buy the further out contract at a higher price. Last year we looked at which markets are in Backwardation and Contango, and here’s an update:

Markets in Contango:

Crude(Disclaimer: Past performance is not necessarily indicative of future results)

Coffee(Disclaimer: Past performance is not necessarily indicative of future results)

US Dollar(Disclaimer: Past performance is not necessarily indicative of future results)

Corn(Disclaimer: Past performance is not necessarily indicative of future results)

Wheat(Disclaimer: Past performance is not necessarily indicative of future results)

Markets in Backwardation:

Emini SP(Disclaimer: Past performance is not necessarily indicative of future results)

10yr note(Disclaimer: Past performance is not necessarily indicative of future results)

Mixed Markets:

Gold(Disclaimer: Past performance is not necessarily indicative of future results)

Lean Hogs(Disclaimer: Past performance is not necessarily indicative of future results)

Alternative Links: Podcasts

“It’s not about trying to make all the trades a winner – it’s about having the average win be much greater than the average loss – and that is asymmetry.” 

Why You Don’t Want Symmetry in Investing – (Top Traders Unplugged)

Masters in Business: Cliff Asness – (Barry Rithlotz)

Managed Futures:

Managed Futures Global Volatility: Consider Global Macro and Managed Futures Strategies  to Hedge Potential Equity Bond Volatility – (Bill Burns)

Attain’s Managed Futures Rankings – (Attain Alternatives Blog)

Big Names in Managed Futures:

Barclay’s David Walker Joins Winton – (FT)

Man Group moves away from Managed Futures – (Value Walk)

Crude Oil:

Diverging developments in oil markets vs. energy shares – (Sober Look)

Probe:

Banks Face U.S. Manipulation Probe Over Metals Pricing – (Bloomberg)

EU Opens Probe of Cargill Buying ADM Chocolate Business – (Wall Street Journal)

Managed Futures Rankings

We doubt anyone is staying up all night waiting to see who made it into our semi-annual rankings the way they watched  Doogie Howser dishing out awards in his underwear; but we do take this stuff seriously around here, and are excited to announce we just finished calculating our latest Semi-Annual Managed Futures Rankings, updated through January 2015. The rankings are something we do every 6 months in pursuit of answering that eternally difficult question to answer: “What’s the BEST managed futures program?”

2015 Badge

Who’s the best is a tricky question? Do you mean: Best last year? Best for all time? Best risk adjusted return? Best in terms of lowest drawdowns?

We’ve dedicated extensive resources over the years to analyzing and testing a rankings system that would best reflect what we believe to be the important metrics for measuring skill in this investment space. Our rankings start by filtering the BarclayHedge database to a smaller subset of managers which have at least 36 months of track record, are registered with the NFA, offer managed accounts, and are viable business concerns (no prop trading records for example).

Overall, there are 8 separate categories, from best programs with risk adjusted performance, best reward managers, as well as best on our Attain Focus list. Click here to download the report and see who made it. There’s many newcomers after a banner year for managed futures in 2014, while many familiar names continue to dot the rankings as they have done report after report for years. Enjoy! And don’t forget to pick up the phone and dial our team with any questions on the who, what, when, and why behind all of the managers listed.