No Reason to Abandon Ship

There was the ultra-rare mention of managed futures on CNBC yesterday when they had on  Susan Roberts of R.G. Niederhoffer Capital Management to discuss market movements in the wake of the Japan quake. (click here for the video) After explaining that we are exiting a period of historically low volatility levels, and mishandling the definition of a CTA somewhat (next time, just say it stands for professional ‘Commodity Trading Advisor’) Susan said:

“The takeaway is that you may not be getting what you expect from your investment in managed futures. Currently, because trend is down in bonds and up in equities, any flight to quality after a big shock event is going to catch CTAs positioned the wrong way in both of those markets, and you’re going to end up with more of the same from your CTA investors, so this is a very good time to take a step back, take a look at your portfolio, make sure you understand exactly what  your risk exposures are, and perhaps investigate long volatility strategies, things that can make money during equity declines, and tail risk protection strategies.”

This is all fine and good, and we mentioned a similar thing in this space yesterday – that yesterday caused some pain for managed futures (CTAs). But a CNBC watching client of Attain took her comment ‘this is a very good time to take a step back’ to mean this is a good time to get out of managed futures.

Now, we’re not sure if Susan Roberts was saying that this is a good time to get out of managed futures. For one, it doesn’t make sense for her to be saying that while at the same time recommending you look at long volatility strategies (which managed futures are). But if that is somehow what she was saying – we couldn’t disagree more.  In our opinion, this is the time you want to be getting into managed futures, because of their long history of crisis period outperformance and because they are a long volatility investment.

Yesterday definitely caused some pain, but managed futures should shine if this crisis turns into an extended down move for stocks and commodities.  In her own words, now is the time to ‘investigate long volatility strategies, things that can make money during equity declines’, and managed futures are the poster child for that type of investment (see chart in our past post here).

Ms. Roberts – please clarify…. Are you saying now is the time to get out of managed futures? Or are you saying now is the time to step back from normal investments and get into managed futures because of their long volatility profile?

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.