10 of the Best Managed Futures Performers in January

While one month’s performance is no way to judge an investment that has 3 to 5 year cycles, a glance at who’s doing well in the different environments month to month can be a useful data point at times. Here’s the top managed futures performers (by return only) for the month gone by:

Note: These programs are not necessarily recommended by Attain. For a list with much more thought behind it – check our semi-annual rankings (updated July 2014). New rankings coming this week.

 (Disclaimer: past performance is not necessarily indicative of future results. Programs listed consist of those with at least a 3 year track record tracked by Attain Capital Management for investment by clients via managed accounts and do not represent all available programs in the managed futures universe.  The Max DD represents the worst drawdown of all time for the listed programs).

Managers and ProgramsJan. RORMax DDMin. Invst.
Purple Valley Capital - Diversified Trend 19.55%-49.34%1,000,000
KeyQuant SAS - Key Trends (QEP)15.74%-19.15%10,000,000
Quality Capital - Global Diversified (QEP)13.51%-38.77%10,000,000
Conquest Capital -- Conquest Macro (QEP) 13.23%-56.09%10,000,000
IMFC -- Global Investment (QEP)13.08%-20.27%2,000,000
Clarke Capital -- Jupiter12.15%-44.78%3,000,000
Dreiss Research Corp (QEP)11.90%-51.44%1,000,000
Robinson-Langley Capital 11.75%-43.29%200,000
Molinero Capital -- Global Markets 11.46%-23.04%3,000,000
Revolution Capital -- Mosaic (QEP)11.27%-56.22%10,000,000

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

Walmart’s Wages, Biotech Bubble, and Saving the Planet Trading Futures

Risk Management:

Risk Management Always Matters – (A Wealth of Common Sense)

The Economy:

What Wal-Mart’s Pay Increase Means For The Economy – (FiveThirtyEight)

The Billion Dollar Startup Club – (The Wall Street Journal)

Forget the tech bubble. It’s the biotech bubble you should worry about – (QZ)

FiveThirtyEigtht’s Q&A on the Economy – (FiveThirtyEight)

Greece had a chance to make the euro zone work better. It blew it – (The Economist)

Climate Change:

Trade Futures, Save the Planet – (Bloomberg View)

Crude Oil:

Why crude prices must go up – (Futures Magazine)

Social Media:

The Reformed Broker explains Social Media Approach – (Investment News)

Regulation:

U.S. futures regulator’s chairman says probably will step down next year – (Reuters)

Just for Fun:

Michael Jordan’s Thank You Cards Don’t Mess Around – (Funny or Die)

A Coal Producer Just Bought Back His Family’s Business for 99% Less Than He Sold It For – (Bloomberg)

At Chipotle, How Many Calories Do People Really Eat? – (Stocktwits)

Boston’s Ridiculous February Snowfall In One Chart – (FiveThirtyEight)

Diversification Sucks

With US Stocks pushing up to new all time highs once again this week, we’re seeing more talk of going with simple over complex, just doing the basic 60/40 portfolio, and so forth. We’re seeing more of the feeling – “Diversification Sucks!  I would be waaaaaaaay better if was just 100% long US Stocks… or even better, 150% or 250% long.”

We had some clever things to say on this topic, but found the following post out there by James Osborne of Bason Asset Management (from a few months ago) which said it much better:

[Read more…]

Alternative Links: Investor Greats

The Problem With Intuitive Investing – (A Wealth of Common Sense)

Follow-up: Will Warren Buffett Buy an Oil Company? – (The Reformed Broker)

Is Warren Buffett a closet technician? – (Midnight Trader)

Managed Futures:

Improving on the correlation benefits of managed futures – (Futures Magazine)

Managed Futures Performance – (Hedgeweek)

Are You Looking in the Right Place for Hedge Fund Returns? – (MoneyBeat)

JLN Managed Futures: CTAs begin 2015 with a stellar January – (JLN)

Asset Allocation:

Asset Allocation Intangibles – (A Wealth of Common Sense)

The Efficient Frontier Part 2 – (Attains Alternatives Blog)

Crude Oil:

Hedge Funds Turn Most Bullish on Brent Oil in Seven Months – (Bloomberg)

Get Ready for $10 Oil – (Bloomberg View)

Forex:

Leave currency trading to the professionals – (Knoxville News Sentinel)

The Efficient Frontier Part 2

Contrary to popular belief, The Efficient Frontier isn’t our attempt to write about Star Trek (we can only dream); it’s actually an investment/asset allocation concept put forth by those who believe in Modern Portfolio Theory. If you have no idea what we’re talking about, we covered the concept in depth last year which you can find here, and back in 2010, here. For those wondering how the curve has changed, let’s take a look.

The data from last year’s Efficient Frontier (Jan ’94- Dec ’13) is the purple line and this year’s (Jan. ’94 – Dec ‘ 14) is the blue line:

Updated Efficient Frontier

(Disclaimer: Past performance is not necessarily indicative of future results)
Data Stocks = S&P 500, Bonds = S&P/Citigroup International Treasury Bond Index EX-U.S Index,
Managed Futures = Dow Jones Credit Suisse Managed Futures Index

All around, last year’s returns moved the Efficient Frontier up and to the left, meaning, all portfolio’s increased returns while eliminating volatility (a win-win for everyone).  This year’s returns also lifted the (36/24/40) portfolio from 6.44% to 6.68%, while actually slightly decreasing volatility by 0.02%, proving once again to be the most optimum portfolio mix  (highest return with lowest volatility) over multiple investment environments in the past {past performance is not necessarily indicative of future results}.

The comparison of these two curves illustrate a unique situation in which Managed Futures was able to increase its returns without increasing its volatility. Some of that may have to do with the lackluster performance the years prior to 2014. Meaning, Managed Futures returns might have caught up to its volatility {past performance is not necessarily indicative of future results}. Meanwhile, the traditional 60/40 portfolio all but stayed the same.

We realize that tacking on a year of returns only offers a small lens of how each portfolio performs over time (even if this is looking at data over the past 20 years). Before the current never ending bull run that we’re now experiencing, the Managed Futures diversified portfolio continued to offer the most optimum portfolio mix. Additionally, a 100% allocation to Managed Futures used to offer the highest return with the highest volatility, while a simple stocks and bonds portfolio only offered the lowest return with medium volatility. You can see that chart posted by CME back in 2008, here {past performance is not necessarily indicative of future results}.

Finally, for the drawbacks of the efficient frontier chart. It’s as simple as risk doesn’t necessarily translate to just volatility. It’s the same issue that most have with the Sharpe Ratio, and doesn’t consider downside volatility and drawdown to name two…). Meaning, these types of charts and ratios treat volatility as a bad thing, when low volatility can be not so smart.

Different Exposure, Different Price

Long Only Commodities as an asset class has been plummeting since around April last year, and the downtrend continues into 2015. The average move of commodity futures in January came out to be -5.02%, compared to ETFs -7.54%, with ETFs underperforming the futures markets they supposedly track by 2.52% {Past performance is not necessarily indicative of future results}.

Here’s our monthly look at:

1. How the numerous commodity ETFs which have sprung onto the scene the past few years are tracking a simple strategy of just buying the December futures market of that commodity, under the theory that the ETF will have to roll their positions periodically throughout the year, and in doing so take on costs the simple strategy does not have.

2. How the passive investment strategy of being long commodities (either via futures or ETFs) compare to an active strategy going both long and short commodity markets via a professional commodity trading advisor (as tracked by the BarclayHedge Ag Trader Index).

(Data as of January 30th, 2015)

Commodity ETF Over/Under Performance 2015

CommodityFuturesETFDifference
Crude Oil$CL_F
-4.47%
$USO
-12.48%
-8.00%
Brent Oil$NBZ_F
-6.45%
$BNO
-10.57%
-4.12%
Natural Gas$NG_F
-6.63%
$UNG
-7.45%
-0.82%
Cocoa$CC_F
-6.02%
$NIB
-8.45%
-2.43%
Coffee$KC_F
-2.13%
$JO
-3.21%
-0.80%
Corn$ZC_F
-4.85%
$CORN
-6.27%
-1.42%
Cotton$CT_F
-2.53%
$BAL
-1.99%
0.54%
Live Cattle$LE_F
-4.20%
$CATL
-8.08%
-3.88%
Lean Hogs$LH_F
-4.21%
$HOGS
-13.59%
-9.39%
Sugar$SB_F
0.83%
$CANE
1.77%
0.94%
Soybeans$ZS_F
-5.96%
$SOYB
-6.17%
-0.21%
Wheat$ZW_F
-13.41%
$WEAT
-14.02%
-0.62%
Average-5.02%-7.54%-2.52%
Commodity Index $DBC-5.69%
Long/Short Ag Trader CTAs0.61%

(Disclaimer: Past performance is not necessarily indicative of future results)
(Disclaimer: Sugar uses the October contract, Soybeans the November contract.)
Long/Short Ag Trader CTA = Barclayhedge Ag Traders Index

Weekend Reads: Is Leverage Your Friend?

Investors: Financial Leverage Is Your Friend, Seriously – (Institutional Investor)

Projected Oil Prices – (Wall Street Journal)

You’re Smart, But You Can’t Forecast – (Barry Ritholtz)

Managed Futures Diversified Portfolio vs. Traditional 60/40 Portfolio — (Attain Alternatives Blog)

Just for Fun:

At the Time Warner Center, an Enclave of Powerful Russians – (The New York Times)

‘Saturday Night Live': All 141 Cast Members Ranked – (Rolling Stone)

Ginsburg: ‘I wasn’t 100 percent sober’ at State of the Union – (Associated Press)

A Cheat Sheet For Comey’s Speech On Race And Policing – (FiveThirtyEight)