Are Alternatives’ Assets Here to Stay?

There’s no doubt the general conversation around Managed Futures the past couple weeks hasn’t been performance, but assets. First Moningstar reported an inflow of $1.4 Billion for managed futures funds in the first two months of 2015. Then the Wall Street Journal caught on, and now that Barclayhedge has released asset flows of $5.7 Billion in February, we’re starting to get the whole picture… There’s a lot on money flowing into Managed Futures at the moment. But will the assets last? And will the long term growth actually come from Managed Futures or their Liquid Alternative counterparts?

First, we’ll look at the charts  from the major publications regarding Managed Futures, Liquid Alternatives.

Wall Street Jounral Asset Flows(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Wall Street Journal

This is no shock to anyone who has been following the industry for the past 5 years. Liquid alts have exploded since 2009 with managed futures being a popular liquid strategy selection. But does the chart look the same when you throw in all of the Managed future folks (managed accounts, private funds,  and liquid alts)?

CTA AUM(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Barclayhedge

While assets on the Liquid Alts side have been booming over the past couple of years, Managed Accounts have actually been struggling (when you take out the heavyweights like Bridgewater and Winton) . However, investors are buying into all kinds of Managed Futures exposure, recently. In February, Barclayhedge reported inflows of $5.7 Billion, a 3 ½ year high for CTAs.

February Asset Flows(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Barclayhedge

This is great news for Managed futures folks that have been bleeding assets for the past couple of years. The question now becomes, is this just another cycle of in and out flows, or will we see sustained growth in the space in the coming years? If we go back 3 ½ years ago (mid 2011) to see what performance was doing back then, we could draw similar conclusions where the industry saw significant in flows right after outlier gains.

Managed Futures Performance vs asset flow(Disclaimer: Past performance is not necessarily indicative of future results)
Data via Barclayhedge

Recent trends suggest that we may in fact see sustained growth (at least for now). The McKinsey Report provides a nice graph of which “Investor Types” plan to increase or decrease their allocation to Alternatives in 2014-2015.

Allocation to Alternatives(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Above the Market

On average, 31% of investor types say they plan on increasing their exposure to alternatives in 2015, compared to 13% saying they plan on decreasing their exposure. All we know is these investors need to know that Managed Futures strategies are long term investments, where there is no such thing as consistent evenly spread out returns. We’ll see if these allocations last or if its just another round of performance chasing. The good news for managed futures advocates is that last year’s performance did not require a market crisis event to show their worth to clients {Past performance is not necessarily indicative of future results}.

The truth of investors’ true intentions will come when they rely on this exposure during crisis period performance, and they find out some “Alternatives” aren’t so Alternative under the hood. For more on different types of alternative exposure, see here, here, and here. For more on how the return drivers of different Alternative Investments work, check out our “Truth and Lies of Alternative Investments.”

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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.