The Evolution of EVE

We profiled the popular spread trader Emil Van Essen earlier this year in our newsletter; but, of course, the exciting stuff always happens after we highlight someone. And along those lines Emil van Essen (EVE) recently announced that they will begin trading intra-commodity spreads (spreads between markets, like buying Corn, selling Wheat) in the Emil van Essen Spread Trading Low Minimum program effective immediately. The popular spread trading program has traditionally focused on trading inter-commodity spreads (spreads between different contract months of the same commodity, like buying December Corn and selling March Corn), which look to take advantage of inefficiencies in pricing across contract months of the same commodity as well as the roll yield that comes from investors moving from once contract to another at expiration. This new strategy will allow EVE to take advantage of mispricing in markets that are highly correlated (Corn and Wheat) but still trade on their own metrics.

According to Emil’s long time top lieutenant Bryan Kiernan, the addition of intra-commodity spreads is the culmination of ongoing research into the firm’s existing spread models. Specifically, it is the result of a six-month long research project that showed adding intra-commodity spread exposure added diversification, lowered volatility, and increased rate of return in their models. (PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS)

EVE will be very conservative with initial trading allocations to this new component of their strategy, and will only apply 5% of client assets to intra-commodity trading. Slowly incorporating new ideas is always a good idea in our opinion, and we are happy to see EVE taking a more conservative approach in this regard. Margins are estimated to be 1% to 2% per spread, while portfolio margin use will remain similar to current levels with a soft cap around 20% of equity, which is also good news.

The downside is that intra-commodity spreads can be, by definition, riskier than their inter-commodity counterparts. There is always the possibility that a world event (drought, supply disruption) could have a larger impact on one market more than the other. Risk management is the key to success for any managed futures program and leads us to our key point; as long as EVE is able to manage the risk across the “intra” markets as well as they have with inter-commodity spreads, then adding the new markets is a good idea. However, one bad loss due to a disruption in the oil pipeline in the North Sea or a drought in Russia could upend years of hard work that has seen Emil van Essen steadily increase assets in the managed futures space.

Of course, Emil made his name by being one of the first managers to trade spreads in a managed futures program, so it is not surprising that he continues to look for new opportunities in the market. His pedigree speaks for itself and, in our opinion, deserves the benefit of the doubt. We look forward to watching this new evolution in the program play out.


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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.