What’s the Best Managed Futures Program? Our Top 15


Managed Futures Rankings August 2015
With managed futures back in the limelight some after a strong 2014, more and more investors are on the search for a program that fits their wants and needs. Which brings us to the most frequently asked question….

What’s the BEST Managed Futures Program?

There’s no easy way to answer this but we try our best with our newly released semi-annual Managed Futures Rankings highlighting the Top 15 overall programs.

Finding the right Managed Futures Program for your portfolio isn’t easy. It is trickier than it looks. Put too much emphasis on returns, and you penalize those who control risk. Too much emphasis on experience, and you penalize a potential new star. Too much reliance on the present, and you discount the past and so on.

 

We’ve dedicated extensive resources over the years to analyzing and testing a rankings system that would best reflect what we believe to be the important metrics for measuring skill in this investment space. Our rankings start by filtering the BarclayHedge database to a smaller subset of managers which have at least 36 months of track record, are registered with the NFA, offer managed accounts, and are viable business concerns (no prop trading records for example).

Overall, there are 8 separate categories, from best programs with risk-adjusted performance, best reward managers, as well as our “Programs You Should Know” list. Click here to download the report.

 

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

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

[Read more…]

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!

[Read more…]

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)