What You Need to Know about Alternative Investments – Seminar

While some of you might be surprised to find this out… knowing us only in the digital realm of blogs, twitter, and such – there’s actually real life people on the other end of this blog, researching, writing, and scouring the internet for all things alternatives. And we know real flesh and blood alternative investment managers as well. We talk with them every day, hearing their thoughts on where markets are going, what new opportunities they see ahead, and more.

Which led to this bright idea – maybe some of you interested in Alternative Investments might want to meet these managers face to face and hear from them directly. The world’s not all video conferencing and virtual reality just yet – there’s still room for human interaction, right?

So why not get out from behind the computer, and shake a hand or two at our quick half day seminar “What you need to know about Alternative Investments” on May 5th. Yes, we know its Cinco de Mayo – but how many of you are doing a Tequila Bar Crawl anyway… And we will have cocktails following the event!



We’ve got three short presentations for you:

First: Vice President of Evestnet, Ryan Tagal as the keynote speaker. He’ll discuss the popular Liquid Alternatives choice, compared to  possible benefits of private funds and direct access. He’ll also discuss trends among investment advisors and some of the best performing alternative investments of the year.

Next, alternative investment service providers (think non-boring accountants and lawyers) will hold a panel on “What’s new in Alternatives.”  Since the panel is on the “front lines” each day working with managers, they’ll discuss what’s working with alternative asset managers, what new products are being traded, where the growth in assets is coming from, and what best practices investors should be looking for.

Finally, our second panel will dive into the nitty gritty of alternatives with managers themselves;  observing how the managers go about identifying areas of opportunity and alpha in markets around the world.  Topics will range from why these managers selected managed futures and commodities as their Alts vehicle of choice, to where they think the U.S. Dollar and stagnant commodity markets might be going.

If all that will make you a little thirsty – the event will end with a networking and cocktail hour, allowing to speak directly to the panelists and other investors  attending the event.

Unfortunately, space is limited, so please register today to secure your spot. Did we mention it’s FREE to attend thanks to our generous sponsors. Click here to register.


Alternative Links: Back To Futures


Back to the Futures CTAs can still deliver in spite of recent setbacks – (Hedge Fund Journal)

How Many Hedge Funds? Only 15-20 For The Highly Skilled – (Hedge Fund Insight)

The Benefits and Drawbacks of systematic investing – (CTA Intelligence)

Carry and Trend in Lots of Places – (PIMCO)

4 Ways Futures Accounts Get Taxed — (Attain Alternatives Blog)

Futures Industry:

Futures Brokers Feel Strain from Low Interest Rates and Red Tape – (FT)


Investors Allocating to Hedge Funds via Managed Accounts – April 2015 – (Preqin)

Are Alternatives’ Assets Here to Stay? – (Attain Alternatives Blog)

4 Ways Futures Accounts Get Taxed

The reason we dislike paying taxes each year may go beyond the natural annoyance at handing over some of your hard earned money, and have just as much to do with how complicated it can be. In one calendar year, tax codes can change up to +500 times a year and with the IRS having 20% of the their budget cut over the last 5 years, that can create a lot of headaches – and delays. Which might be why John Oliver of HBO’s ‘Last Week Tonight’ reported some tax paying citizens send their checks stained with mustard, or why sitting governors make some not so nice WW2 comparisons to the IRS.

But those of us who trade futures have a little different take on tax season, where we feel a little more celebratory. You see, futures markets don’t just give you exposure to world markets and the ability to go both long and short – there’s some real tax advantages as well. It all starts with exchange traded futures and options on futures being labeled as ‘Section 1256 Contracts’ by the IRS.

1256 Contract

Unlike stocks, futures based investments are based on their marked to market value at the end of the year, so any open trade profits or losses in the account are treated as realized profits or losses as of the last day of the year. This is generally good news for investors, as futures gains or losses are treated as 60% long term capital gains and 40% short term capital gains, NO MATTER the holding period. For example, an investor who holds a futures position for just a few minutes, or hours, can book 60% of the profits on that trade as long term gains (and pay the lower long term capital gains rate) – even though the trade was anything but long term.

In addition, futures based investments do not require the accounting of individual trades. This is a godsend for any of you who have spent hours searching through old brokerage statements from 4 years prior trying to find the cost basis for a certain stock. There is also no trade by trade accounting in futures, no wash sale rules, and losses can be carried back three years on futures based investments. Not too shabby.

But what if you’re not really a futures ‘trader’? What if you’re more of a futures investor, accessing the futures markets through a professional manager utilizing either separately managed accounts, private funds, or (as is becoming more and more normal) mutual funds and ETFs.


Separately Managed Accounts:

An investor having their futures account managed for them by a professional commodity trading advisor (CTA) gets all of the same futures market based tax treatment outlined above, as the manager trades the same exchange traded futures. That’s the good news, but there’s a catch – the CTA’s management and incentive fees are not part of the section 1256 gains and losses, meaning the 1099-B reports the marked to market profit or loss before these fees.  All hope is not lost, however, as investors can offset some of those fees by doing itemized deductions and taking investment-related deductions. Problem is, such miscellaneous itemized deductions are only deductible to the extent they exceed 2% of your adjusted gross income. So, an accredited investor making $300,000 per year can only deduct expenses over $6,000 (2% of $300k).  Investors utilizing separately managed accounts receive a 1099-B from the Futures Commission Merchant holding the account, with the total amount of fees paid to the CTAs available via your broker or the CTA you’re invested in (there’s no required government report outlining the total fees).


Privately offered Funds

Which brings us to investors who access the futures markets through privately offered funds, or as their also known – commodity pools. Fund investors haven’t really ‘traded’ futures markets themselves or had futures traded in accounts in their name. They’ve invested in a partnership (for tax purposes) which does the futures trading, and the partnership reports what portion of the futures trading profit or loss is taxable to each investor every year. The good part of that is the tricky 2% of adjusted gross income barrier goes away, with the fund able to offset all the expenses to the fund (including management and incentive fees paid to the trading advisor) against profits. The (semi) bad part… the investor receives a K1, which in our experience never gets into your hands as quickly as you would like, potentially delaying your tax filing. Many people find a single K1 much easier come tax time, however, than multiple 1099-Bs outlining futures profit and loss.  Finally, there is no taxable event upon redeeming your investment in a private fund, meaning you don’t pay capital gains on the difference between the sales price and purchase price (you’ve already paid tax via the K1 numbers each year).


Liquid Alternatives – Mutual Funds & ETFs

Which brings us to the fast growing world of alternative investment mutual funds and ETFs. The biggest difference in mutual fund taxation is that there is a profit or loss from the buying and selling of the mutual fund (not just from what’s happening inside of the fund like in the private fund/K1 scenario). Buying a mutual fund for $5,000 and selling it later on for $7,000 will result in $2,000 for taxable capital gains. Further, it’s not abundantly clear what happens to the blended 60/40 tax treatment of futures markets within a mutual fund utilizing such contracts. From what we can tell, it doesn’t survive the mutual fund wrapper (if we’re wrong on that, please comment on this post), with investors getting a 1099 listing the annual capital gain and dividend income from the mutual fund and that being treated as normal capital gains income, going into either the long term or short term buckets, not both. But ignorance is bliss for many in this regard, as they willingly sacrifice whatever tax savings may be present from a K1 structure in order to receive a 1099 1 to 2 months earlier.

Happy Tax Season!

If you have any questions about different tax codes or exposures when it comes to futures trading, please feel free to give us a call or email us.

Are Alternatives’ Assets Here to Stay?

There’s no doubt the general conversation around Managed Futures the past couple weeks hasn’t been performance, but assets. First Moningstar reported an inflow of $1.4 Billion for managed futures funds in the first two months of 2015. Then the Wall Street Journal caught on, and now that Barclayhedge has released asset flows of $5.7 Billion in February, we’re starting to get the whole picture… There’s a lot on money flowing into Managed Futures at the moment. But will the assets last? And will the long term growth actually come from Managed Futures or their Liquid Alternative counterparts?

First, we’ll look at the charts  from the major publications regarding Managed Futures, Liquid Alternatives.

Wall Street Jounral Asset Flows(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Wall Street Journal

This is no shock to anyone who has been following the industry for the past 5 years. Liquid alts have exploded since 2009 with managed futures being a popular liquid strategy selection. But does the chart look the same when you throw in all of the Managed future folks (managed accounts, private funds,  and liquid alts)?

CTA AUM(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Barclayhedge

While assets on the Liquid Alts side have been booming over the past couple of years, Managed Accounts have actually been struggling (when you take out the heavyweights like Bridgewater and Winton) . However, investors are buying into all kinds of Managed Futures exposure, recently. In February, Barclayhedge reported inflows of $5.7 Billion, a 3 ½ year high for CTAs.

[Read more…]

Weekend Reads: Confidence & Model Building

Confidence and the model builder – (Lakewood Views)

Long Crude Oil and Short Treasury Bonds? – (All Star Charts)

Direct Investing with a Twist – (Institutional Investor)

RCM Alternatives Promotes Paul Rieger to Managing Director and Partner – (Business Wire)

Just for Fun:

Celeb chef’s new recipe for success: Healthy fast casual – (CNBC)

An interesting perspective of California water preservation – (Gizmodo)

Last Week Tonight: John Oliver on Government Surveillance (Interview w/ Snowden) – (John Oliver)

There Are Few Libertarians. But Many Americans Have Libertarian Views – (FiveThirtyEight)

Happy National Siblings Day: How Did It Start? — (International Business Times)