Long-only Commodity ETFs v. Futures- March 2012
Here’s our monthly look at how the various Commodity ETFs are stacking up against the commodities they are supposed to track. Futures trading is complicated, presents a risk of loss, and isn’t for everyone – especially since past market performance doesn’t necessarily indicate future results – but given the numbers, we’re left scratching our heads. We’ve yet to receive a good answer to the question: why invest in an ETF when you can just roll December contracts annually?
Intro To Spread Trading – The Common Spreads
While most people think of trend following when they think managed futures, the asset class has expanded to include a wider variety of strategies. We take a look at one these alternatives, spread trading, and explain several of the most common ways these trades are executed.
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…
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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