Managed Futures end Q3 with 0.50% gain in September


As September ends, so does the third quarter of 2011.  According to Newedge’s numbers, managed futures was up 0.50% for the month, bringing it to -1.79% year to date.

In looking back at Q3, it was a bit of a roller coaster ride for managed futures investors.  The European Debt Crisis continues to weigh heavily on the markets, including foreign currencies, which have seen significant intervention as nations scramble to protect their economy. Here in the US, the bond market continues to flex its muscles as the Fed now seems intent on rallying the long end higher. Overall, these sure feel like the most difficult market conditions since 2008, when the world was brought to its knees thanks to the financial crisis (it could easily be argued that the ’08 chapter was just the first act and we’re still in the financial crisis).

For most managed futures investors, the last 3 months have been okay (but not great).  Long volatility programs saw initial losses as the leg down in commodities and stock markets was a trend reversal, yet are now in line with the trend lower, while short volatility option sellers and discretionary traders had a very rough quarter due to the exploding volatility.   The first signs of trouble for discretionary traders came in July with Dighton Capital closing the month down -32% as they held short in the Swiss Franc while it screamed upward. Alas, that trade has become the poster child for why mean reversion strategies don’t work. Meanwhile, option sellers saw their day of reckoning in August when short volatility traders stepped in front of the proverbial volatility freight train. Thankfully, FCI and the other short volatility programs we track, including Cervino and White River, where able to stop the bleeding and bounce back with a strong month of trading in September.

On the other side of the spectrum, most multi-market traders posted strong numbers in Q3 as traders took advantage of strong trends in bonds, precious metals, grains, and foreign currencies. Top performing managers in the trend following spectrum included Clarke Capital, which saw gains in the Worldwide, Global Basic, and Global Magnum programs in all 3 months of the quarter. Unfortunately, short term multi-market traders did not do as well, with programs like Bouchard Capital Management and Dominion Sapphire struggling for most of the quarter.

The top performing sector overall was our “catch all” category called specialty, which includes mostly single market and/or sector specific traders that we don’t want to lump into the multi-market sector.  Top performing programs in this sector for the quarter included 2100 Xenon Fixed Income, which took advantage of the upward trend in bonds, as well as PE Investments Standard, which saw success shorting foreign currencies over the last two months.  Both of these programs stepped up to the plate and showed what makes them a valuable addition to a managed futures portfolio in what was otherwise a very turbulent quarter.

What will the 4th quarter bring? With no end to current market volatility in sight,  we’ll have to wait and see.


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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

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Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.