Dunn's Is Top Insurance Fund
A managed futures pool, Dunn's Insurance Dedicated Futures Fund LLC, was the best performer for 2008 in a specialized database of funds for variable-return life insurance wrap investing. Dunn's earned 73% for the year and has a compound annual return of 21% since inception in November 2005.
The database, covering insurance-dedicated vehicles in a wide variety of hedge fund and long-only strategies, belongs to Compensation Strategies Inc. The 2008 returns for 63 funds in the database ranged from (-)48% to 73%, according to Bill Dreher of Compensation Strategies. He said that with a couple of exceptions the funds did better than major market indexes.
Dunn's Insurance Dedicated Futures Fund is a multi-advisor pool which allocates its assets to six systematic trading programs, varying from short-term to long-term and from trend-following to pattern-recognition. All of them trade exchange-listed futures contracts. Dunn Capital Management Inc. licenses the fund's systems and provides trading and back-office services.
To be treated as a life insurance policy for tax purposes in the US, funds have to be dedicated to this kind of investing. The clients typically invest through insurance companies.
ICE Starts CDS Clearing
Having received permission from the Federal Reserve and the Securities and Exchange Commission last week, the IntercontinentalExchange began to process and clear credit default swap indexes. The exchange started with North American Markit CDX indexes; the clearing of liquid single-name CDS is expected in the following months.
The use of CDS, a form of insurance against the default of debt, grew immensely during the credit boom and is blamed for large losses at financial companies, notably AIG, the insurance giant that has been bailed out repeatedly by the US government in recent months. Regulators have called for central clearing of CDS and other exchanges such as CME are expected to get approval to provide this service.
ICE chief executive Jeffrey Sprecher says the clearing system is designed to further enhance well-functioning CDS markets by reducing counterparty and systemic risks and increasing transparency and capital efficiency.
The exchange has entered into an agreement with Markit to produce the daily settlement prices required for mark-to-market pricing, margining and clearing.
Copper Gains Continue
Copper futures went up 10% in the past week as China, the largest consumer of the metal, reportedly stockpiled copper and traders expected greater demand from Chinese stimulus spending. Short sellers covered their positions, giving a further boost to the price.
CME to Clear S&P Goldman Sachs Index Swaps
CME Group has signed a licensing agreement with Standard & Poor's to clear swaps on the S&P GSCI Excess Return Index, a widely used commodity benchmark. Centralized clearing of over-the-counter swaps is expected to appeal to customers because it minimizes counterpart risk, a major concern since the collapse of Bear Stearns and Lehman Brothers.