Risk On/Risk Off Market Snapshot: January 2013
Keeping tabs on market correlation is a fundamental part of risk management because understanding correlation is key to diversification. If various markets are moving up or down in unison, risk and volatility can quickly grow beyond your expectations. That’s why we’ve started keeping an eye on two statistics that help illustrate how easy or difficult it has been to stay diversified in the futures markets: the risk on/risk off trade, and market correlations.
Asset Class Scoreboard: January 2013
January may have been a decent start our favorite asset class, but half of the proxies we use to track various asset classes started the year at a full sprint. It may not be sitting atop the rankings, but this is how managed futures is supposed to operate.
Long-Only Commodity ETFs vs Futures- January 2013
January is finished, which means we have a new month of data in our regular series examining long-only commodity ETFs, and comparing their performance to the December-dated futures contracts. This time around, two of the ETFs seem to have the advantage. Will this translate into a lasting advantage for the ETFs? We don’t think so.
Futures Markets and the Futurization of Swaps
Part of the Dodd-Frank financial reform bill involved changing the rules on what derivative swaps can take place off-exchange. In other words, there will be stricter limits on off-exchange swaps, resulting in more of these trades taking place within established exchanges – the whole process is sometimes called the “futurization” of swaps. For exchanges – and even managed futures – there’s quite a bit at stake.
Meanwhile, in Bonds…
Last December, we pointed out that Bridgewater’s Ray Dalio was growing bearish on bonds for 2013. We’ve been waiting for the bond bear market for a while, but every time we talked about it, the market seemed to head in the opposite direction. But now, the last few months have been giving us reason to start getting excited once again.
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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