In Search of the Educated Investor
It’s not often we agree with managed futures critics, but this time around, we’re making an exception. A recent piece in the Wall Street Journal told the story of a man who passed on the managed futures mutual fund MutualHedge Frontier Legends Fund. We’re not a huge fan of the managed futures mutual fund in general; we prefer the liquidity, transparency and lack of load and sales fees you can get from managed accounts. But our admiration of Rick has nothing to do with the Legends fund itself. No, for us, it was the why.
Weekend Reads
As the cycle of relief and despair over Greece winds relentlessly on, it’s getting hard to remember what financial reporters used to attribute every day’s market moves to. However, the world marches on, and there are, in fact, stories that are not about Greek debt or the price of oil. Here are some we’re reading as we head into the weekend.
Financial Media Wising Up? Reminders on Managed Futures
It’s not exactly a secret that managed futures has gained in popularity in recent years. In fact, from 1980 to mid-2011, assets under management for the asset class increased by over 800%, rendering managed futures as one of the fastest growing alternative investments available. That kind of growth has attracted a fair amount of media attention. We discussed in the past how media coverage of the asset class has had struggles with accuracy, but we have to say, 2012 coverage, in general, has been much better than in years past.
A new article up at Financial Advisor, for instance, does a decent job of making the right argument about managed futures- that you need to understand the way managed futures performance works before you invest. There were a few points of contention, though.
Presidentially Prescient Market Moves
As the Republican primaries continue on, a big topic of conversation has been how individual presidents would impact the economy. Ritholtz has always done a pretty good job at digitally shaking his head at these kinds of conversations. That being said, his dismissing of the President’s impact on market movement is typically looked at from a 20,000 foot perspective. What about the immediate aftermath?
Market Dynamics and CTA Performance – February 2012 Update
When CTAs evaluate the markets, they’re looking for different things, depending on their strategy. That being said, especially in the trend following space, managers will often select markets in order to diversify their program and hedge against all of their positions losing money in one fell swoop. Of course, futures trading is complex, and there is always a risk of loss, but these market selection tactics help CTAs better manage risk within a program.
2011 made that difficult, as we outlined in our 2012 outlook. After seeing higher than usual market correlations and a major surge in risk on/risk off trading, CTAs were hoping that 2012 would give them a trading atmosphere better suited for market diversification. How’s that working out?
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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