5,000 Bushels of Corn on your Lawn
The comment that will never die when having a conversation with people unfamiliar with managed futures and commodities trading is something along the lines of, “So, you ever get a truck full of Corn delivered to your house?” The short answer is no. commodity futures contracts have a finite life, so you don’t actually trade “Corn Futures” but a contract month for Corn. Most of the market is now speculators, and end with cash settlements, and no physical delivery.
The quickest way to manage $1 Billion: start with $5 B
The news today is of a supposed shining star of commodity trading closing up shop, with Clive Capital (managing over $5B AUM at one point) having sent a letter to their clients explaining its “long volatility approach,” didn’t allow for many opportunities in this current market environment, and therefore would be shutting down. While we don’t typically hear about Clive in the managed futures world, it is important to point of their differences.
Managed Futures ‘sort of’ Participate on Bernanke Rollercoaster
Where have we seen this neon green sight before? Oh, that’s right, the last time Fed chairman Bernanke spoke about starting the end of the QE… Managed Futures experienced a risk on day, but did that equate to a larger daily return? Why/ or why not?
Congress creating the next wave of futures traders?
A new bill signed into law now ties student loan interest rates to 10 yr Treasury Note yield, with a cap on just how high the interest rates can go. This has brought both praise and heavy criticism from the media. Being futures folk, this makes us think this may be just the thing to create the next wave of futures traders. You see, all those trillions in student loan debt tied to the 10yr Treasury note could now be hedged against a rise in said 10yr rates via the futures markets. That’s what the futures markets are here for.
What Everybody Ought to Know About Managed Futures Asset Class Growth
The managed futures industry prides itself whenever assets under management is brought into the discussion. It’s grown exponentially over the years (past performance is not necessarily indicative to future results), but as we’ve pointed out before, that total AUM number includes the largest Hedge Fund in the world — Bridgewater — which we don’t consider to part of the group. This suggests that this AUM number can be quite deceiving, so we decided to recreate total AUM without the growth from Bridgewater, and managed futures’ largest program, Winton. Plus, a look at the managed futures quarterly growth numbers and why it might be just what managed futures is looking for.
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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