Another year and another reflection back on the year that was. Before we get too excited about 2014 and the endless possibilities, opportunities, and chances, we want to look back on the year that elected our CEO to the NFA board, the year we said goodbye to a turtle trader, and the year we suggested minting a billion dollar coin to the federal reserve. 2013 was anything but dull for Attain, and we wanted to review what you found the most interesting. Here’s the Top 10 list.
Those of us in managed futures live in a world full of contracts, rules, regulations, and hardly a physical commodity in sight during trades. But there’s an underbelly to all of that activity called physical commodity trading that sometimes gets overlooked by those of us who merely trade the derivatives of all that oil, grains, and what not. And it’s HUGE. The 2012 combined annual revenue of their Top 10 comes out to be $1.3 Trillion (yes that’s trillion with a capital T). But these names are hardly the household names of other billion dollar businesses like UPS or IBM or the like.
We’re very pleased to see this article in the top 5 posts of 2013, considering it has only been published for 2 months. In early October, Bloomberg, befuddling to us, released a rancid article in which if you’re thoroughly educated about managed futures, and the full fee structure, makes the industry appear as though it’s a legal way to take peoples live savings. We’re not those people. Posting it on our blog wasn’t enough. Our “smackback” was also covered on FT Alphaville, as well as CTA Intelligence. Even though this blog post has reached thousands of readers, the Bloomberg article still gets republished by different media sources, citing slightly different statistics. It’s a long read, we know, but it’s worth your time. Trust us.
With a heavy heart, we learned that legend, Liz Cheval, died of an aneurysm in March. Although this post is from 2011, we would only hope that this tragic event has brought attention to the influence she had on the industry, and breaking through the glass ceiling spearheading a career path for women of the next generation in this industry.
This article garnered much attention with the managed futures industry, even a response from proclaimed founder of the ratio itself. Red Rock Capital suggests the real definition of the Sortino ratio uses not the standard deviation of negative returns, but instead the ‘target downside deviation’, which is the deviations of the realized return’s underperformance from the target return. What does that mean to the normal person who has trouble reading math equations?
5. “Mint that Coin”
This post is almost a year old, but it’s as relevant as ever. As if anyone could ever forget, the government shutdown in October and the debt ceiling debate dominated media coverage in October. This article though is from the last fiscal cliff debate, not 10 months before the one in October, with the idea of minting a trillion dollar platinum coin so the president wouldn’t need congressional approval to raise the debt ceiling. It’s really quite interesting, as farfetched, and hypothetical as it is. But as we later found out this year, the Obama administration took it more seriously than we and anyone else thought. Got love those freedom of information acts.
It’s no secret that asset growth in managed futures has grown exponentially since 2008 and its crisis period performance. However, the number most used is BarclayHedge’s databse includes Bridgewater, the largest hedge fund in the world. Although they dabble in managed futures, we wouldn’t consider them to be in the same category as other CTA’s. We take them out of the picture to get a better representation.
Upon surfing the interwebs for useful financial commentary and statistics, we stumbled upon the Worst 10 ETF performer’s YTD from Index Universe… and can you guess what most of them have in common? Gold. As if that was much of a surprise, but -56% YTD performance is just brutal. Five of the ten worst performers in 2013 are Gold ETF’s (4 of those Gold Miners ETF’s which we’ve discussed before here), two are Silver ETF’s (which from a commodity standpoint is highly correlated to gold), with the remaining three short VIX ETF’s.
Crude Oil is a dominant market when it comes to content in the futures industry, and this year was no different. While the energy market tends to display what we in the biz call “Contango,” Crude Oil displayed highest level of Backwardation (reverse Contango, if you will) in more than 15 years.
What does the average CTA look like? This great question was brought to us by a prospective client, and while it seems simple on the face of it, the question is actually a bit more complex, and worth a detailed explanation. This got us thinking of the question a different way that our database can understand: what is the average monthly performance, gain, loss, drawdown amount, and so forth across all CTAs. Without further ado, here’s the stats on over 48,698 monthly returns for 2,603 CTA programs going back to 1977.
Adding ‘alternatives’ to your portfolio has never been as easy as today with the plethora of so called ‘liquid alternatives’, or mutual funds specializing in alternative investments such as managed futures. And the marketers have never had such an easy time separating the naive from their money in their bids to raise money for these funds. Enter an old five-pager by the Principal Group we dug up which explains how to utilize 15 different hedge fund strategies in portfolio construction. It has all you would ever need to know about these highly complex investments, dedicating 4 to 6 sentences to each one! Are you picking up the sarcasm?