Is the Size of the Managed Futures Industry Inflated by 56%?

About managed futures being the largest hedge fund category, and that $300 billion+ of managed futures assets under management (AUM) we see reported here and there (and in turn report here on our blog)…  Turns out, after delving a little deeper into the numbers, that total AUM number from the BarclayHedge database includes Ray Dalio’s Bridgewater Associates – also known as the largest hedge fund in the world – in their managed futures AUM figures.

What does that mean for managed futures AUM? Well, with Bridgewater clocking in at a solid $122 billion under management, they make the total of $337 Billion about 56% higher than it would be otherwise (at $215 Billion without Bridgewater). And they are likely a big slice of managed futures asset growth, as well. We broke it out below (and also separated out the 2nd largest CTA on the list, Winton Capital Management’s $28 billion) to show just how much of the AUM total is made up by Bridgewater:

Problem is – we tend to think of Bridgewater as more of a global macro hedge fund… not really a Commodity Trading Advisor (CTA) which should be included in the managed futures numbers. Some cursory Googling of Bridgewater will show that they invest in things like stocks and inflation protected securities. They are registered with the NFA as a CTA, and they do have a bit of a managed futures performance profile, with gains in 2008 while most other hedge funds were down. And they do trade a LOT of futures and various futures markets. But they are seemingly always up, so we’re not sure how much that winning 2008 and the fact that they trade futures paints them as a managed futures program.

What about statistically?  Well, Bridgewater’s Pure Alpha programs are actually more correlated to the BarclayHedge CTA index (+0.32) than they are to the BarclayHedge Hedge Index (+.017) providing an argument for inclusion, but the All Weather program clocks in at a correlation of just 0.13 versus the CTA index and 0.51 against the Hedge Index, making it appear much more apt for a hedge fund categorization. For comparison, Winton has a correlation of 0.72 against the CTA index.

We raised the subject with BarclayHedge owner Sol Waksman, and he explained that the BarclayHedge database and index has included Bridgewater since the very early days, and that the lack of correlation to the index makes sense for a primarily fundamental trader like Dalio. As for the true size of the industry, he believes BarclayHedge’s AUM numbers actually under-report the real number because there are many large pools of capital (such as large macro hedge funds, energy funds, and proprietary trading firms ) that “fly completely under the radar.”

So where does Bridgewater belong? Should they be in the managed futures number? Or should they only be counted toward the total AUM of hedge funds? Or does it matter at all?

The election may be over in the US, but we figured a question like this is a good one to put to you, the (managed futures) voter:

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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.

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, 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.

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