There is a growing number of fund of funds devoted to commodity trading advisors. The following managers specialize in this type of investing. Here they describe their approaches, demonstrating the diversity among multi-advisor products. Their comments have been edited.
We will feature other multi-advisor managers in future issues.
Kim is the manager of Autumn Gold Multi-Advisor Fund LP, a newly launched CTA investment vehicle. She will select advisors for the fund using a proprietary system that she developed during her thirty-year career in the futures industry.
In her book, Building Wealth with Managed Futures, she explains the statistical methods for evaluating a CTA and how to select traders for a diversified portfolio. These methods of evaluating risk, limiting leverage, and diversifying across trading styles and markets traded are some of the fundamental strategies that she employs. Ms. Avery is also the founder of AutumnGold.com, a database and statistical analysis service that has tracked CTAs and hedge funds since 1997.
She worked for a number of firms including E.F. Hutton, Merrill Lynch, Balfour Maclaine Futures, Price Group and Futures Asset Management. From July 1992 through March 1998 she was a European representative for Renaissance Technologies, the manager of Medallion Fund, a hedge fund with more than $5 Billion in assets.
Autumn Gold Multi-Advisor Fund is new and does not yet have a track record. The following return is for a CTA index from the Autumn Gold database.
Autumn Gold CTA Index 2008 return: 21.42%
Comments: “In the current economic environment there is a driving need for investment products that provide both transparency and liquidity. This futures fund is designed to address those requirements. It targets returns not correlated to traditional stock/bond portfolios and provides daily valuations and weekly liquidity.
With the volatility in the financial markets since September 2008, investors have been looking for calmer waters to ride out the storm. Many people are looking to move capital from stocks and hedge funds into other investment classes that are non-correlated to equities. Transparency and long-term lockups are a concern for all investors
The majority of futures funds report their trading performance after month-end. Investors wishing to redeem often are limited to monthly or quarterly withdrawals with 15 days or more notice
We will provide investors with a daily valuation for Autumn Gold Multi-Advisor Fund. In addition, investors will be able to see the fund's aggregate daily positions, including the number of long and short contracts. Investors will have the ability to make subscriptions and redemptions on a weekly basis.”
James was previously at UBS, as executive director of UBS Wealth Management Hedge Fund Advisory business and member of the UK Investment Committee. Before that he was CIO at Mizuho Investment Management in London and CIO of BAREP Asset Management, the alternative investment subsidiary of SG Asset Management in Paris. At BAREP he launched and managed credit and emerging market hedge funds.
Solaris Global Commodities Fund 2008 Return: 17.9
Comments: “The fund is designed to harness the profit potential and volatility of global commodities markets in both rising and falling markets. SGCF invests with a diversified pool of eight to 15 best-in-class commodities specialists, selected to generate risk-adjusted performance and to offer full diversification in terms of markets (energy, industrial and precious metals, agriculture, meats and softs) and strategy (systematic and discretionary, trend-following and non-trend-following, technical and fundamental, directional and relative value).
The underlying managers trade highly liquid futures contracts on a managed accounts platform that provides optimal risk management capabilities through full transparency. SGCF offers monthly liquidity.
SGCF is managed with a dynamic bi-monthly allocation and rebalancing process, which enables the fund to quickly adapt to changing market conditions and to focus on the most attractive opportunities in order to be able to generate returns and adjust its risk parameters, whatever the direction of commodity markets. SGCF targets an annualized return of 12%-15% with a downside volatility target of less than 12%.”
Below is an extract from Mr. Edwards' 2009 outlook, previously published in the Eurogestion monthly review.
“The hedge fund world has seen a number of spectacular blow-ups in 2008 and the industry has, on average, lost about 20% in performance. In addition managers, almost without exception, have seen a further 20% to 30% of their assets under management disappear as investors put in redemption requests to reduce their exposure. In other words, the hedge fund industry is likely to begin 2009 with at least 40% less assets than it had in 2008, a dramatic cleansing!
The dinner party talk of everyone setting up a hedge fund is, like the dot.com dinner party talk of the turn of the century, well and truly over. The once rosy outlook for hedge funds is thankfully subject to new scrutiny and we expect that the number of hedge fund closures will increase in 2009 as investors pull their cash and there is a re-allocation towards either proven alpha generators or back to long only.
This represents a historic opportunity for investors who understand the nature and dynamic of alternative investing to increase their exposures or make their first initial forays. The key skill set for investors is to identify the managers that will survive and, more importantly, that have the necessary investment skills to profit in the new liquidity starved, low leverage environment.
Certain broad strategies are expected to benefit from the continued volatility and uncertainty. Managers who are good disciplined traders in the broad macro space, including currencies, rates, commodities, anything liquid, should have plenty of opportunity. Equally there is still more juice in the CTA community and we see little reason for the short term CTA's to stop generating performance.
We are living through a long and painful, but ultimately healthy rebalancing. Change is progress and evolution. And in evolution, those who cannot adapt to changes in the environment eventually wither and die. We expect the pickings for those that survive to be huge.”