Thank You! Attain Repeats with Best Introducing Broker Award

Thanks to all of the customers, managers, vendors, and the folks at CTA Intelligence for recognizing all of the hard work we do here, with our second straight Best Introducing Broker award. We don’t do it for awards… in fact we like to give out the awards around here (see our Top 15 managers and ‘Commy’ awards); we do it because it is challenging, because it is fun, and because we love doing it.

2014 2015 awards

We’ll say simply, Thank You. Thanks to those who have been clients going on 13 years. Thanks to those who fought with us during the PFG crisis. Thanks to the CTA’s who manage our clients’ funds with such care and diligence. Now, back to work!

P.S. —  A shout out to Covenant Capital, the manager of our Trend Fund, for one of the performance awards, and two of the firms we partner with to run our business (and is included in our “108 Resources to grow your CTA Business list,” Arthur Bell and Turnkey Trading Partners for winning service awards.

Pursuing Portfolio Perfection

It’s 5 years into the one of the biggest stock market bull runs of all time, and all looks fine for the aging bull even after this brief downturn in October.  For many, this has been a great run and they’ve been doing quite well during it. For many others, it’s been rather annoying, as their “smart” choice of diversification has under performed recently.

But here’s the deal – it’s not about beating the S&P 500. You’re on the quest to find a portfolio that best matches your needs before retirement. For some, that’s so far in the future, you’re not worrying about volatility. For some, it’s within reach, and you want to protect what you have before something bad happens. For some, you’re looking for something in between the two. So what’s your “Perfect Portfolio?” It’s not an easy question to answer, and many pros have tried (check out Meb Faber’s impressive list of asset allocation strategies and stats here). The basic portfolios to consider in our mind are the following:

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Best Managed Futures Programs – September

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).

 (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).

Top 10 CTA's of SeptemberSeptember RORMax DDMin. Invst.
Purple Valley Capital - Diversified30.68%-49.34%1,000,000
Paramount Capital (QEP)28.14%-57.77%100,000
Hawksbill Capital - Global Diversified (QEP)20.81%-62.98%5,000,000
Southwest - Global Diversified 20.12%-32.79%200,000
Mulvaney Capital - Global Markets (QEP)17.69%-45.02%10,000,000
Westphal Trading - Diversified 16.53%-26.10%500,000
Tactical Investment Management -- Instl. Comm. (QEP)16.30%-41.51%10,000,000
Revolution Capital - Mosaic (QEP)16.05%-53.34%10,000,000
Covenant Capital - Aggressive 15.59%-20.41%50,000
Kelly Angle - Genesis (QEP)14.49%-45.59%2,000,000

Under the Hood: Wisdom Tree’s Managed Futures ETF

You got to hand it to the marketing folks over at Wisdom Tree…. No sooner had the ink dried on Managed Futures good 3rd quarter and the Dow hit new 8 month lows this week than we started to see Wisdom Tree advertising their Managed Futures ETF ($WDTI) on CNBC. Marketing 101 = strike while the iron’s hot.

But how much “managed futures” exposure are you really getting with this product. We’ve looked under the hood of WDTI before, back when it launched in 2011, and thought it was high time to meet their managed futures marketing blitzkrieg during this stock market correction with some data and information on how well this product does what it purports to do (track managed futures).

 

  1. WDTI is a replication strategy

WDTI doesn’t track a managed futures index made up for actual managed futures managers providing alpha for their clients and managing real money. WDTI tracks something called the Diversified Trend Indicator (DTI), created by Victor Sperandeo, aka “Trader Vic”. The DTI tracks 24 markets (50% financials, 50% commodities) on a monthly basis and is designed to reflect rising and falling price trends in those markets. That is somewhat similar to the models used by systematic multi-market managed futures programs, but not completely similar. It is an attempt to capture the bulk of what they do at a lower price point, without the sophistication around the edges.

 

  1.  WDTI hasn’t replicated Managed Futures very well

So how has the WDTI done in replicating managed futures exposure… not great. Since its launch, it’s trailed the managed futures index (which we would think should be its benchmark) by 1,117 basis points (11.17%).  And what about a real program, not just the index. It’s trailed Covenant Capital’s Aggressive program, the same model used by our Trend Following Fund by 2,588 basis points (25.88%) since it was launched. And that’s after Covenant’s 2 & 20 fees. Past Performance is not necessarily indicative of future results.

1 3 Total Chart

Table of Comparisons
(Disclaimer: past performance is not necessarily indicative of future results)
Data points: 1/11 – 9/14

  1. DTI underperforms Managed Futures in market crisis periods

While the ETF itself only goes back to 2007, the DTI goes back quite a bit further, allowing us to be able to see just how the indicator has done in past crisis periods. You can see it has underperformed the managed futures index in past crisis periods.

DTI vs Managed Futures Crisis Period(Disclaimer: past performance is not necessarily indicative of future results)

  1.  DTI is becoming less and less correlated with Managed Futures

Notice the interesting pattern below, where the DTI has become less and less correlated with the managed futures index over the years. Why?  Because one of them (managed futures) is the results of actual managers continuously doing research and improving their models. And one is a single indicator designed years ago.

34 month correlation(Disclaimer: past performance is not necessarily indicative of future results)

  1. 25% of the portfolio is in just 2 markets 

With 13% of the portfolio tracking Euro currency futures and 12% tracking Japanese Yen futures, a full quarter of the portfolio is in just two markets. Watch out if those two are in an extended sideways period without trends.

 

  1.  WDTI doesn’t go short energy…

We just don’t get this one. Why the arbitrary rule just for one sector of the portfolio. They say it is to protect against the risk of ruin, as energy markets can spike on geo political events. But at the same time they allow short trades in Natural Gas &*^%.  And have you seen the volatility in Cocoa, or Copper, or Coffee – talk about price spikes.

 

  1.  There are no intra-month position adjustments

We don’t quite get this one either. What if a trend starts, or ends, during the middle of a month? Guess you get in or out late. This surely cuts down on Transactional costs and keeps things simple, but we’re sure it cuts down on performance also.

 

  1.  WDTI is Average, by design

At the end of the day, Wisdom Tree looks to have decided to try and replicate the beta of managed futures via an imperfect proxy, the DTI. What will that look like moving forward? The “average” performance of the managed futures index? Something less? Something more?  ‘Average’ looks less and less likely as the indicator continues to diverge from the live managers doing trend following strategies, with ‘less’ possible if there are no trends in the euro and yen while a short trend in energy, and a ‘more’ scenario dependent on trends in that concentrated currency exposure and hopes of an uptrend in energy.

A Big List of Alternative Investment Folks on Twitter

Looks like this is sort of a thing now… saying here’s a list of 10, 50, 106 “must follows” on twitter, just as we’ve seen with Business Insider’s “106 Finance People You Have to Follow on Twitter”, BrightScope’s “25 Most Socially Influential Advisors”, and so forth.

twitter-logo (1)But there doesn’t seem to be a list we could find of alternative investment folks, and specifically those focused on commodities, managed futures, and global macro strategies. The more we dug into why that is… the more we found a big hole where all of the people in the alternative investment space should be… There just aren’t that many of the 1000s of commodity trading advisors out there sharing their views on twitter.

 

Come on guys… it’s 2014!!  Time to join the party and show the world just how smart, funny, sarcastic, and charismatic us futures folk can be.  Twitter isn’t about telling the world what you had for lunch like we all feared back in 2010. It’s the modern day business card. It’s a 24/7 virtual conference where you’re simultaneously talking with hundreds if not thousands of people – it’s the new frontier where wit wins! So go on over and sign up and start making us smarter… or at least making us laugh.

In the meantime, here’s our compilation of people and firms currently out there on twitter (in no particular order, despite the numbering)  providing the latest insight, humor, debate, and news on investments – especially the alternative kind:

  1. @rcmAlts – of course… it’s our list!

Managers

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