You can’t go far in learning about managed futures without coming across the name John W. Henry, who has to be considered the most famous person (for non managed futures people) to come out of the managed futures space – although that fame is as a result of his foray into the world of sport, not his successes in investing. We’ve used the line more than once before when seeing the eyes of an uncle or random stranger at a wedding gloss over at our explanation of managed futures and exactly what it is we do for a living… “it’s how John Henry, owner of the Boston Red Sox, made his money”. That’s usually followed by an “ahhh”, even though it likely hasn’t shed any new information about how it is he made that money.
But it seems that what transformed Henry from trend following nerd to household name – success with the Red Sox – is starting to cut the other way for him. From the Bloomberg article, John Henry’s Terrible, Horrible, Very Bad Year, we learn that the owner who, in 2004 helped break the Red Sox curse and took the team to their first World Series victory since 1918, is hitting what one might charitably label a “rough patch.” Via Bloomberg:
..he has made a mess of two different teams in two different sports on two different continents. The Red Sox are in the basement of the American League East, and Liverpool is off to its worst start since “Love Me Do.” Henry is no longer seen as a genius but as just another rich, out-of-touch, out-of-town owner who has lost the faith of his teams’ fans and the reverence of the sports-business community.
We feel bad for the fans of those teams (but only so much, we do have the Cubs here in Chicago for anyone who feels a World Series title in 2004 is too far removed from the present), but we must confess that isn’t what we thought of when we saw Bloomberg’s headline last week. We thought the headline was referring to Henry’s core business of running managed futures programs.
You see, while the Red Sox are in last place, his main CTA, GlobalAnalytics, just happens to be in the midst of its worst-ever drawdown, having lost -35.85% since the fund’s peak in April 2011. As they say, “when it rains it pours.” The CTA has also seen a sharp decline in assets, which started in 2005 when Merrill Lynch decided to stop putting their clients in JWH products.
Disclaimer: past performance is not necessarily indicative of future results.
What’s to blame here? Volatility, Merrill Lynch, or his foray into sports? Would the performance be better if John Henry was actually at the controls day to day? We doubt it. To us it looks like the model has performed as it was designed to… it is just a more volatile model than investors are looking for these days. The mammoths like Winton or Man AHL in the industry tend to see that. We often look at CTAs getting large and experiencing shrinking volatility as a bad thing; but perhaps the assets are growing because the volatity is falling. Maybe they are meeting investor demand for lower volatility and that is why they are seeing smaller gains and losses – not because of their size.
Whatever it is – it’s sad to see this titan of the managed futures industry losing assets on top of his team’s losing games. We wish him the best and hope that his efforts to turn things around on the field and in the books are successful.
P.S. – It’s interesting to note the timing between the outflow of assets from Henry’s program and the performance of the program. It looks like Merril Lynch couldn’t have made much worse of a call – pulling all of the money during the 05/06 drawdown; right before the program took off in 2007 and 2008.
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, 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.
The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.
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. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.
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.
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