Data Mix-ups and the Bottom Line
If you’ve ever looked at an offering document or prospectus- and we mean really looked at it- you know what we mean when we say it’s often a numbers overkill. Much of these numbers are required by regulators, and further, are often required to be presented in such a manner that can drive the most seasoned financial marketers crazy- only because it’s against every bone in their body to package things in such a clumsy manner. Even data aggregation sites and services aren’t always user friendly, no matter how familiar with them you may be.
But to be fair, it’s not just the Average Joe that can fumble in reading through these numbers- financial professionals are guilty of such missteps as well, and we are no exception.
March Madness, Attain Style
Because we like March Madness… And because we like managed futures… And because the business of raising money from investors sure feels like a tournament at times, with the bulk of CTAs no doubt feeling like Long Island U going up against perennial powerhouse Michigan State – it was only natural for us to create our own little CTA tournament for some fun.
We created our bracket by taking the 32 largest CTAs by AUM according to the BarclayHedge database (the majors), and then adding the 32 largest CTAs we track in house that weren’t in the previous list (the mid-majors and small conference teams), then seeding the programs 1 through 64, with the first four getting 1 seeds, next four 2 seeds, and so on…
If Bill Gates Were as Tall as His Money
The move in Apple’s stock over the past few years has been nothing short of unbelievable – going from $90 at the start of ’09 to near $600 today (566% gain), and from $400 just a short two and a half months ago (50% gain). The odds of a stock doing what Apple has just done would be on the order of 1 in a million or so according to standard statistical methods.
But here’s the thing – these types of outlier moves (both up and down) happen way more frequently than once every million times, highlighting one of the often forgotten aspects of the investment world, that financial matters are not normally distributed. That is, you can’t use normal statistical measures (even when using the actual outlier data…) to make observations about what may happen moving forward.
Reminders on the Risks in Gold(man Sachs)
If you work in or care about finance, and you don’t live in the stone age, odds are you’ve seen the Goldman Sachs resignation letter. If you haven’t, read it now. And pay attention, because this is important. The letter highlights a change in culture at Goldman Sachs, from client focused to bottom line driven. This kind of change is alarming, and worth closer examination.
UBS and Barclays to the Rescue- Maybe?
Remember that one time we said that the industry needed to rise up and make MF Global clients whole? Well, we still stand by that statement, but this isn’t exactly what we meant by it. With news of UBS and Barclays stepping up to the plate to purchase claims to MF Global money, we’re left wonder- what, exactly, is the catch here?
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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