The Top 10 Managed Futures Performers of April

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.

 (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 ProgramsApr. RORMax DDMin. Invst.
Brandywine -- Symphony Preffered (QEP)10.16%-38.11%1,600,000
AIS Capital -- 3X-6X (QEP)7.79%-89.67%5,000,000
Emil Van Essen -- Spread Trading Program6.81%-36.21%50,000
Vantage Capital -- Growth 8.44%-32.53%100,000
Monsoon Capital -- Asian Pacific Systematic 1X6.40%-45.50%5,000,000
Ramsey Quant Systems -- RQSI GI. Asset Allocation 2X 5.81%-31.66%5,000,000
Pacific Capital Advisors - Vanguard 5.33%-11.39%100,000
Clarke Capital -- FX-Plus5.08%-30.81%1,000,000
QIM -- Global Program (QEP)5.07%-16.63%20,000,000
Di Tomasso Group - Equilibrium (QEP)5.22%-46.63%5,000,000

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

Alternative Links: Another Option

Managed Futures:

Manage Broad Global Volatility: Consider Global Macro and Managed Futures – (Morgan Stanley)

Managed Futures Funds- Another investment option – (Commodities)

Why Some Alternative Investments Make A Lot Of Sense Right Now – (Benzinga)

Trend Following Wizards – April (Automated Trading System)

Commodities:

Traders Warn on Gold Liquidity – (Financial Times)

Everything you need to know about El Nino & Commodities – (The Attain Alternatives Blog)

Miscellaneous:

Why Chicago Bonds are Junk in 7 Charts – (Zerohedge)

New Breed of Endowment Managers Beats Harvard at Its Own Game – (Bloomberg)

George W. Commodity

George WNo, this isn’t a big reveal that George W. Bush had some great commodity trade a la Hilary Clinton’s infamous Hog Trade back in 1978. And it isn’t our official endorsement for a presidential candidate (then or now).

No, we’re still just talking the commodity markets, and that close cousin of the V shaped reversal – the W. reversal.  The “V-shaped Reversal” is when a trend ends quickly, basically coming back up as quickly as it had gone down. Now, that’s not a bad thing, necessarily, if it happens over a few years (see Crude Oil in 2007 and 2008 – actually a reverse V). But, typically, the faster and sharper the reversal in a market trend, the faster and larger the loss for a systematic program tracking that market. We’ve touched on this before (here and here), and have even seen past W-reversals.

The latest W. scare comes from the commodity sector, as seen in our monthly asset class scoreboard post.

Commodities 2015 W Move(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy: Morningstar

Now, of course – this is only a couple months of moves, and putting it on a much longer time scale brings some much needed perspective to things. If we take a step back and look at the past 12 months, we certainly see a different story, with this scary W. just a blip on the proverbial radar down there on the bottom of the screen, and prices still below their longer term moving averages.

Past 12 months Commodities Move(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy:Morningstar

Now, we know where George W. hailed from… and we shouldn’t be surprised that the commodity W. is from the Texas are as well. If looking for a reason for the alternating up down months, look no further than good ‘ol Texas Tea: Crude Oil, where you can see nearly the exact same pattern as the overall commodity index. Now, most of that is due to the fact that most commodity indices are heavily skewed towards the energy markets – so as Oil goes, so goes commodities. But we’ve also seen the US Dollar reverse its strong upward trend (or an upside down W = M), in turn putting pressure on many commodities, not just Oil.

Crude Oil W(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

USD M Move(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

No one knows when a big rally in commodities will come, if at all. After all, OPEC just said they expect Oil to be below 100 for the next decade.  And then there was the cheeky, as always, take from Josh Brown:

“It would be both hilarious and par for the course to see a major breakout for commodities right now. With disinflation being the Fear du Jour and the whole world busy hedging against the strengthening dollar, this would literally be the last thing anyone expects.”

It’s the last thing anyone would expect, and just the type of outlier move we would welcome. Thanks W.

 

 

Attain Funds April Performance

Mama always said there would be days like this, with three of the four Attain Family of Alternative Investment Funds finishing down on the month. The Relative Value fund was able to buck the trend making consistent gains on the recent crude oil rally {Disclaimer: Past performance is not necessarily indicative of future results}. It is this programs nature to zig when traditional managed futures strategies zag. Meanwhile, the other funds suffered from trend reversals in U.S. Dollar/Foreign Currencies and bonds.

For more information of the Attain Funds, click here.

FundApril*YTDAnn DD
Attain Relative Value Fund+6.48%+13.53%-1.91%
Attain Global Macro Fund-4.77%+2.76%-5.70%
Attain Short Term Alpha Fund-6.65%-1.07% -8.36%
Attain Trend Following Fund-2.92%-5.83% -6.37%
Liquid Alternative Comparisons
AQR Managed Futures Strategy I Mutual Fund (AQMIX)-3.21%+5.07%-3.21%
361 Managed Futures Strategy A Mutual Fund (AMFQX)+0.87%+4.31%-0.09%
Managed Futures Mutual Funds-3.00%+2.42%-3.00%

Disclaimer: Past performance is not necessarily indicative of future results

Managed Futures Mutual Funds = The Morningstar Managed Futures Category Performance, showing an average of all Managed Futures mutual funds on their platform. Performance as of April 30th, 2015.

Annual DD = The worst drawdown experienced by the strategy for the calendar year.

Disclaimer:  *The return numbers herein include estimates of the full month performance for the previous month, and include assumptions for accrued fees, the effect of additions and redemptions, and other factors which may cause the final numbers compiled by the fund administrator to differ slightly.

You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. Commodity Futures Trading Commission (CFTC) rules require delivery of a disclosure document at or prior to the time an advisory or subscription agreement is delivered. The disclosure document includes the principal risk factors and costs of participating in a particular CTA or CPO program including the potential impact of fees and expenses, the “break-even point” expressed both as a dollar amount and as a percentage return necessary to recover one’s initial investment, if applicable. The CFTC has not passed upon the merits of participating in any one particular investment or on the adequacy or accuracy of any one disclosure document.

 

To be 4.7 Exempt or Not To Be, That is the Question

Despite the having the odds stacked against them, we hear from new CTAs and hedge fund managers every day. This isn’t to say that we discourage new CTAs, our 108 Tools to Help grow your CTA Business can speak to that, and we recently discussed how these emerging managers are typically better performers.

But we won’t sugar coat things, it isn’t easy going from $0 to $10 million, $10 to $100 million, or $100 million to $1 Billion under management. Which led many CTAs to RCM’s Alternative Investment Conference this week to hear best practices and so forth. And one question among new CTAs that got debated after the event with some fervor was whether CTAs should be “4.7 exempt” CTA or not.

This is a little inside baseball, but it’s an important question when a CTA is just starting out. For those of you that have no idea what a 4.7 exemption is; filing a 4.7 exemption means that a CTA is exempt from certain regulations such as filing a Disclosure Document with the National Futures Association (“NFA”) – but in exchange for that relief, can only accept QEP investors (Qualified Eligible Investors, which are essentially investment/insurance/bank type companies and private investors with over $2 million in investments) into their program or fund.  Conversely, a CTA can file a Disclosure Document with the NFA and accept any investor they deem suitable for the investment, with the regulatory thinking perhaps that the well-heeled investors don’t need everything spelled out for them.

So, the decision facing a CTA when starting out is whether to:

  1. Avoid the regulators and cost of drafting a Disclosure Document, but only go after the $2million in investable assets and up QEP investors.

Or

  1. Deal with the regulators and draft a Disclosure Document (and re-submit it annually), and go after any investor who can afford the minimum investment.

Now, what we were hearing at the Expo was that the general rule of thumb CTAs get from lawyers is to file the exemption to avoid the hassle of filing D-Docs with the NFA. Most new CTAs, it seems, are being coached to avoid the 4.7 Exemption. To which we say… get a new coach. If you’ve got a golden Rolodex filled with names of multi-millionaires, heads of banks, and Chief Investment Officers at pensions and endowments – sure, the 4.7 exemption can save you some hassle.  But what if you’re trying to grow organically and need every set of eyeballs you can get on your program. Is avoiding a few days of hassle with the regulators each year worth eliminating a big portion of the investing public?

We say no… but haven’t ever really looked at the statistics to see just how many potential investors 4.7 exempt CTAs are ignoring by saving some hassle.  Now, this gets a little difficult, as there are a lot of definitions for both that include insurance companies, pool operators, and foreign individuals (all of whom are QEPs regardless of net worth or income… in a blatant example of the US regulators saying ‘you’re not our problem’). But if we assume all the non-human type of investors basically balance each other out, and represent just a small portion of the overall numbers – then we’re down to looking at how many investors fall in each net worth bucket.
For sake of argument, let’s assume that accredited investors have $1 million in net worth, and QEPs have $2 mm and up in net worth, remembering that all QEPs are also accredited. If you meet the higher standard, you automatically meet the lower standard; and do some quick back of the napkin math to see that there are:

Over $2 million net worth, QEPs = 1.8 million households

Accredited = 8.5 million households

Non Accredited, with investment accounts = 20 million house holds

US Wealth

(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: CNN
(Note = We know the data is from 2007. It’s the most recent data we could find)

Now, this ignores a big part of the puzzle, which is how much money each of those buckets has. It’s well documented that the top 1% command more than 48% of the world’s wealth. But ignoring for a fact that there might be 4, or 40, times more money concentrated at the top, there’s still about 4 times more investors with more than $1 million than there are with over $2 million, meaning, for us – to ditch that 4.7 and go ahead and file that D-Doc.

Sources:

QEPs = Wealth in America — (CNN)

Accredited = How Many Accredited Households Exist in the US — (InvestGeorgia)

Non-Accredited with Investment Accounts = (Census)

For more on the 4.7 exemption and others at NFA, see here:

CFTC 4.7 Exemption

NFA Exemption Descriptions