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

Managers

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Lessons Learned From 37 Years of Futures Trading

Originally From Attain’s 3/’11 Newsletter:

Managed Futures have come a long way in the past 37 years, and so has Barbara Mueller, who will be retiring at the end of March after nearly four decades dealing with futures trading. Barbara has been working in the industry since 1973, and has been an invaluable asset to Attain Capital since 2006.

In honor of her retirement, we’re taking a break from our traditional analysis this week to pay tribute to Ms. Mueller. It has been an honor to work with someone as knowledgeable, talented and motivated as Barbara, and here she provides us with her (often comical) insight from 37 years of experience in the world of futures trading.

Moving Forward, Looking Back

When Attain asked me to come up with a list of the best things I’ve learned after more than 3 ½ decades in the futures industry, it was pretty daunting.  After all, 37+ years ago, we were in the stone age of trading. We did have the wheel (and telephones), but there were no personal computers, no fax machines, no stock index futures, no US options on futures, no 24 hour markets, and gold was trading at $135 an ounce.  There were no Treasury bond futures or other financial instrument futures. The CFTC and NFA (the futures regulatory agencies) did not exist yet.  We were governed by the CEA -the Commodity Exchange Authority.  And the list goes on.

Typical commissions were $75 to $100 round turn. Account forms were only 1 page!  Some of the prices were still written on blackboards at the Chicago Board of Trade and you could inspect physical grain there as well.   The whole managed futures industry was an still an embryo, with Richard Dennis not teaching his Turtles until 1983 and Paul Tudor Jones still a clerk on the trading floor. S&P futures, the most popular trading system vehicle in the world, wasn’t launched until 1982 (the minis didn’t start trading until 1997!) Options on commodities in the United States weren’t authorized until 1984 and System Writer, the precursor to Trade Station, wasn’t launched until 1989.

As one of the first women brokers in the futures industry, it’s been quite a journey-and an accidental one at that.  I was just waiting for a teaching job to open up in the Chicago Public School System and my Dad suggested I go to work for one of his friends at the Chicago Board of Trade in the interim. Thirty seven years later, I guess I can no longer call this an “interim” job!

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This Week in Alternatives: Conference Mania Continues

Conferences:

Conference Time, Chicago Style – (Attain Blog)

Winners of the Managed Futures Pinnacle Awards – (CME & Barclayhedge)

CME Group and BarclayHedge Honor Managed Futures Leaders at Third Annual Managed Futures Pinnacle Awards – (Wall Street Journal)

CTAs:

An Interview with David Harding – (Attain Blog)

DUNN Capital Management LLC – Best CTA – (Hedgeweek)

Regulation:

Vision settles NFA action over supervision of ACE/Yu-Dee Chang – (Futures Magazine)

Performance:

Credit Suisse Hedge Fund Index up 1.13 per cent in May – (Hedgeweek)

Crude Oil:

Oil Futures Gain as Traders Await Storage Data – (Nasdaq)

Get Ready to be Long Crude Oil – (Attain Blog)

DERIVATIVES: Shanghai plans oil futures to rival Brent, WTI – (IFR Asia)

Futures and Miscellaneous:

US Futures Slip Amid Iraq Unrest; Acquisitions Boost Some Stocks – (Nasdaq)

GAIM: Liquid alternatives’ AuM could soon rival hedge funds – (COO Connect)

ICE coffee tumbles – (Business Recorder)

 

The Headlines of the Alternative Space

Performance:

CTAs should not be written off – (COO Connect)

Man Group’s M&A Strategy May Boost Scale, Diversification – (Reuters)

Education:

The 1256 Contract explained – (Forbes)

Futures Trading on Tax Day – (Attain Capital)

Index Pulse – a new market blog with commentary, video and educational resources covering the futures and commodities markets every day. – (Marketwatch)

Regulation:

National Futures Association (NFA) Issues Notice Regarding Changes to Form PQR and Form PR – (National Law Review)

PFGBEST:

American Greed: An Exclusive Confession of a $200 million scam — (CNBC)

Wasendorf will get the attention he so desperately craved — (Futures Magazine)

AlphaMetrix:

It’s a Company, Not a Piggy Bank – (Courthouse News Service)

Futures and Miscellaneous:

Corn and Soybeans Off To Good Start – (Farm Futures)

Get your Comments in (CTA/CPO Capital Requirements)

In late January 2014, the National Futures Association (“NFA”) announced to its membership they were considering requiring Commodity Pool Operators (CPO’s) and Commodity Trading Advisors (CTA’s) to have minimum net capital requirements similar to what the clearing firms (FCM’s) and Introducing Brokers (IB’s) have:

“…reviewing the current regulatory structure applicable to Commodity Pool Operator (“CPO”) and Commodity Trading Advisor (“CTA”) operations. In particular, NFA is looking at ways to strengthen the regulatory structure governing CPO operations to provide greater protection for customer funds… [and] exploring ways to ensure that CPOs and CTAs have sufficient assets to operate as a going concern.” 

The review of the CTA/CPO regulatory structure also includes possible measures such as the verification of CPO fund balances similar to what is done now for FCM’s, and the possibility of requiring all CPO’s to use third party administrators, or at least have a third party approve all movement of money out of funds.

These are wide ranging possible changes, and every CTA/CPO should consider how these changes might affect their business, especially how their costs might increase, and whether that increase in cost would actually do anything to strengthen customer protections. The deadline for submitting comments is fast approaching, and we urge any and all CPO’s and CTA’s out there to get their comments in before tax day, April 15th. Email the comments to CPOandCTAfeedback@nfa.futures.org with the specific answers and commentary they are looking for here:

We won’t bore you with our full response, which is likely a little too much ‘inside baseball’ for most. But here’s some questions to ponder before writing up your comments (and please do, CPO’s/CTA’s).

1.  Should CTA’s and CPO’s be lumped together in this?  CTA’s do not hold customer funds.

2.  Did capital requirements help at all in the case of Griffin Trading, Refco, Sentinel, MF Global, and PFG?

3. What will it cost you to have a third party administrator for your fund?  Are your investors willing to bear that cost? Do they feel the need for greater protections?

4.  What sort of certification would an admin need to be qualified to perform this role if mandated by NFA? What sort of slippery slope are we headed down if this new requirement create the need for admins to register, a new class of NFA member, new fees, new dues, etc.?

5. How would the NFA verify hard to value assets held by CPO’s which do only nominal futures trading but are required to be registered as a CPO?

6. Is this even a problem?  Are customers of your CTA/CPO asking you about protections, are they worried that your insolvency can cause them problems?

 

 

 

Gross or Net, Winton, and 5 vs 29

We got a comment the other day from an investor who reads our newsletters, touching on the fees involved with managed futures – something we covered in depth last year after Bloomberg Magazine trotted out a misinformed piece on ‘Futures Fund Fees’ (see our response here) – but we hadn’t seen the question of fees posed quite like this before:

“You wrote an article a while back addressing the critiques of Managed Futures Indices.  One area you didn’t address in those articles is the fact that performance numbers are reported gross of fees to those indices.  One of the biggest knocks on this space are the high fees involved, so this almost makes the indices useless, one could argue.”

This investor is somehow under the impression that the various managed futures indices are comprised of manager performance numbers gross of fees (that is, not including the usual 2% annual management and 20% of new profits incentive fee), wherever could he have gotten that idea Bloomberg.

To set the record straight – the main managed futures indices are calculated from manager level performance reported NET of fees. Here’s the language from both Newedge and DJCS:

Newedge Language:

“The index calculates the net daily rate of return for a pool of CTAs selected from the largest managers open to new investment.”

DJCS Language:

 “Does the Credit Suisse Hedge Fund Index use net or gross data?

Performance data used in the index is net of all fees. “

We’ll even take it a step further and tell you that NFA and CFTC regulations require managed futures managers registered as CTAs and CPOs to report their performance NET of fees, and that the overwhelming majority of managed futures programs which report to the indices are of a size where they use a third party accounting firm or ‘administrator’ to calculate their monthly performance numbers, insuring the correct deduction for accrued fees, any additions and withdrawals, and so on. It’s actually quite hard for a manager to ‘back out’ the fees and arrive at a gross performance number.

Now… what isn’t included in the performance reported to the indices are any additional fee layers which may be added on for a feeder fund or similar such access point to a manager. For example, we recently assisted a client of an Advisor we work with move over to an Attain fund from their investment in something called the Winton Direct fund.  The client assumed, like the reader mentioned above, that the reason he was up just 5% in his “Winton” investment over the past 5 years while Winton’s stated performance was +29% over the same time – was because Winton was reporting their performance gross of fees.

But that isn’t the case… Winton is reporting net of fees just like they’re supposed to and just like everyone else. The 25% difference between the investor’s returns and Winton’s reported returns isn’t due to a gross vs net problem – it was the investor’s access point, coming in through a big broker/dealer which was charging an additional 5% a year for the access. Maybe that’s an acceptable price to pay for access to the ‘Blue Chip’ manager of the managed futures space IF they are returning 25% per year. But when they are doing only 6% per year (NET of their fees), and you are paying 5% extra to access that 6% return – the numbers stop making sense in a hurry.

For a reminder on the various access points to managed futures and the layers of fees involved – here’s our handy chart breaking it down.  This can also show you how the indices can be net of fees, but not net of ALL possible fees. The managed futures indices are typically calculated from performance numbers reported after the first and second access points (the managed accounts and manager offered funds), not after the distributors (B/Ds and mutual fund wholesalers) have gotten their hands on them.

Chart of Fee Structure

Attain Capital’s Semi-Annual CTA Rankings

Now that the last stragglers have gotten their December 2013 numbers in, our latest CTA Rankings are out, which crunches the data on more than 1,000 managed futures programs in our database; whittles that list down to a ranking universe of a little more than 300, and finally arrive at a consolidated list of top ranked programs using Attain’s proprietary ranking algorithm.

Semi-Annual-CTA-Rankingv2

To be calculated in the rankings, a CTA must first qualify with a three year track record, be a registered CTA with the NFA, offer managed accounts, and be a viable business concern. Once the program is qualified for calculation, we take time into consideration, evaluating the metrics across each 1, 3, 5, and 10 year time periods in addition to the full length of the program’s performance.

The end result are rankings based on a CTAs full performance history and both its returns and risk profile –  not just the past 1 or 3 year period and based simply on returns.  The Top 15 overall can be found at the bottom, with the top 5 in different categories preceding it.  Each program has its compound RoR and Max DD since inception listed, as well as the minimum investment for a managed account and date of inception. See our complete rankings here.