Don’t Ignore the (Correlation) Fundamentals
A recent Morningstar article caught our eye, as it lamented the difficulty of diversifying an investment portfolio when correlation between various asset classes and the S&P 500 is increasing. While the Morningstar piece does a great job of pointing out the rising correlations among traditional diversifiers, there is one big problem with this analysis – it leaves out managed futures. That’s an oversight we’re happy to step in and correct.
Greetings from the CTA World Congress
No rest for the weary around Attain – our own Juan Carlos Herrera hopped across the pond for the CTA World Congress hosted by Terrapin. Designed to bring together world-class managers and investors, the London event was a great success with many familiar faces and a few impressive new ones.
Hedge funds, why do we hate you? Let us count the ways…
People tend to give us a look when we scowl at the managed futures association with hedge funds. After all, if you see hoof prints, you don’t think zebras, right? The problem is that, while CTAs may leave hoof prints, their stripes are way different from their hedge fund brethren. And now there’s even more fuel for the fire…
Managed Futures Spotlight: Quest Partners, LLC
When you’ve researched hundreds of systematic, trend following CTA programs, they can start to blur together. The terminologies and philosophies become similar, and it’s hard to find what distinguishes one program from another. But every once in a while you stumble across a program like Quest Partners LLC. From where we stand, they are not just another trend following program.
Does a Portfolio Track Record Matter with Managed Futures Brokers?
We tend to pick fights in finance. Part of that goes back to the fact that the partners in our firm are fighters, and Attain was, in many ways, born of fire, but that’s a story for another day. The point is that we think that investors should know what they’re getting into, even if the story behind the products discussed is inconvenient to those pushing them. As a result, one of the common “requests” we get from those unhappy with our opinions is one for a track record of our portfolio recommendations. After all, if we know so much better, why don’t we prove it?
It’s a dumb request. Let us explain why.
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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