Long-only Commodity ETFs vs. Futures- November 2012
It’s time for our monthly look at how the long-only commodity ETFs are performing versus simply holding the December futures contract and rolling annually. Futures trading is complicated, presents a risk of loss, and isn’t for everyone, but we’ve yet to receive a good answer to the question: why invest in an ETF when you can just roll December futures contracts annually?
Managed Futures end November Down -0.21%
Sad to say it was another lackluster month for managed futures, with the Newedge CTA Index reporting managed futures down -0.21% for the month. With just one month left in 2012, it’s unlikely we’ll see enough of a turnaround to put managed futures back into the green for the year. We’re obviously disappointed, but it’s all part of being a managed futures investor.
Playing Corn by Ear
Trend followers have been struggling lately, but there is one bright spot in the managed futures world: Ag traders. The CME has released some nice infographics on the Ag space and what drives prices in these markets, highlighting one of the unique aspects of ag markets: the role of market fundamentals.
Weekend Reads
Another week ending higher, despite the best efforts of Congress and the 24-hour news channels to create a cloud of anxiety around the fiscal cliff negotiations. And despite a bit of a head-fake at the beginning of this week, the indices ended up more or less completing the second leg of November’s wicked V-shaped market move. Not a lot of other excitement, besides the couple of lucky lottery winners out there who claimed this week’s record Powerball prize. We have a few ideas about what they could do with that money (a subject we may visit in the future), but for now, here’s what we’re reading headed into the weekend:
Contrarian Currents for Trend Following?
A couple of weeks ago, we published a newsletter called “Is Trend Following Dead?” We don’t believe it is, but the piece has generated a great deal of conversation in investing circles. There are a lot of folks out there who are buying into the obituary of trend following, but we’re hopeful that they are a contrarian indicator.
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any 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.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, 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.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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