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Alternative Market Briefing

MF Global and PFG: the lasting impact on CTAs / CPOs

Thursday, March 28, 2013

By: Mark Melin, Editor Opalesque Futures Intelligence

James A., who wishes to remain anonymous, was an emerging Commodity Trading Advisor (CTA) with a bright future. A quant and trading application developer, he established his public investment CTA product in 2008 with a partner, according to regulatory records. The firm traded an algorithmic model that had shown promise during the market environment of price persistence. Assets under management were growing as the firm received its first institutional allocation, a significant point in an emerging manager’s development.

Then MF Global hit.

James said the large institutional investor was stunned that no explanation could be made as to where his investment capital had gone. The institutional investor had made a substantial allocation to a pool of dozens of CTA with the help of a consultant who knew the CTA space. After the experience, the investor appears scared from the experience.

"He’s been burned. This is still an issue. It’s not a one off event," James said, noting the reputational damage done to the managed futures industry has been significant."

In the wake of MF Global fallout, he refocused his energy into a consulting firm which provides data capture services and conducts algorithmic strategy development, modeling and rendering services for hedge funds, quantitative traders operating in a custom API environment. H......................

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