Mon, May 25, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Consider Managed Futures Investing in a Fashion Similar to Growth Stock Investing

Wednesday, November 14, 2012

In a proprietary study released in Opalesque Futures Intelligence, one of largest managed futures fund managers in Europe and Asia reveals insight: investing in a managed futures CTA as one might consider growth equity investing strategy. This touches on the third rail issue of emerging manager selection and evaluation, always a lively topic inside the industry when one looks to mitigate survivorship bias when drawing conclusions. The founder of Sweden's Risk and Portfolio Management takes the conversation in a new direction.

Exclusive Research Revealed:
Consider Managed Futures Investing in a Fashion Similar to Growth Stock Investing
By Mark Melin


Mikael Stenbom
In managed futures the Pareto Principle, commonly known as the "80 / 20 rule," is alive and well and clearly visible in the distribution of assets under management. Twenty percent of CTAs command anywhere from 80% to 90% of assets under management, depending on the reporting database one subscribes.

But is investing only in the top decile CTAs based on assets, as is commonly the case, the best investment strategy?
Emerging manager investing has been a hot topic of discussion in managed futures on several levels. One issue is once a CTA obtains a lethargic asset management footprint, nimbly executing trades on thinly traded markets can be problematic. Countering to this argument is the experience and organizational gravitas that comes from the more established managers. It is these larger managers who make up mainstream indexes such as the Barclay Btop 50, NewEdge CTA Index or the Altegris 40, the most credible from a study bias standpoint exactly due to their history. These are but a few of many discussions on the topic, which could be taking a new direction.

A proprietary study from Sweden's Risk and Portfolio Management (RPM), a $5 billion manager of multi-CTA managed futures portfolios, reveals data that supports the concept of investing in smaller managers after they have moved from the start up phase to the growth, or "evolving", stage.

"Our study shows a performance bias based on CTA maturity," observed Mikael Stenbom, RPM's founder and CIO. "Consider a managed futures program as one might analyze a stock. There is the start-up phase, the growth phase, the maturity phase and the decline / rejuvenation phase."

In studying the BarclayHedge CTA database, RPM tracked the age of CTA alongside net asset flows and performance. The majority of investment in these CTAs occurred during the maturity phase, just as performance might be declining, according to the study.

The study drew sharp analytical distinctions, noting that increased age and assets under management have negative influences but at the same time offered opportunity. "The CTA universe holds alargely untapped resource of competitive CTAs not (yet) hindered by the negative aspects of success."

RPM offers both direct managed futures accounts and fund products, deriving the vast majority of its assets from Europe and Asia. The compliance regarding a managed futures fund investment in the US, with four primary regulators, each with different agendas and understandings of the investment, presents its own challenges, according to sources. Like many strong European products, RPM is dipping their toe in the US market. The investment is available to qualified US investors through the AlphaMetrix platform. Qualified investors may obtain a copy of this report by e-mailing melin@opalesque.com



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Comment - Top hedge fund managers talk about how easy their jobs have gotten, BlackRock to Schroders warn of Argentina’s $20bn bond glut, The 35-year “investment supercycle” is drawing to a close, says Bill Gross, Gundlach: When the Fed starts hiking rates, 'GET OUT' of this asset class[more]

    Top hedge fund managers talk about how easy their jobs have gotten From Businessinsider.com.au: Time was, before the financial crisis hit, corporate boards treated multi-billion dollar hedge fund managers like Jehovah’s Witnesses pounding on their doors and flashing bibles. But no more.

  2. T Rowe's challenge to Dell deal may fuel critics of 'appraisal'[more]

    From Reuters.com: An increasingly popular tactic used by hedge funds and others to extract more money from buyouts could soon face a major courtroom test when a big investor in Dell Inc may argue that it should be paid a higher price for the 2013 acquisition of the PC maker. The strategy, known as "

  3. News Briefs - Ergen says LightSquared plan unfairly favors hedge funds, Why hedge fund managers make good advisory clients, I learned a lot about dad-bros after spending 4 days in Vegas with 2,000 hedge funders[more]

    Ergen says LightSquared plan unfairly favors hedge funds LightSquared Inc.’s bankruptcy plan gives hedge funds that invested in the broadband company a leg up while blocking telecommunications firms from competing with it, a fund owned by Dish Network Corp. Chairman Charles Ergen said in

  4. Opalesque Exclusive: SEC approves proposed changes to Form ADV, '40 Act - comment period to follow[more]

    Bailey McCann, Opalesque New York: Hedge funds and providers of liquid alternatives will want to pay close attention to proposed reforms approved by the SEC yesterday. The changes will require more frequent reporting, as well as a closer look into social media, liquid alternative strategies, and

  5. New market regime has created more dispersion between managers[more]

    Komfie Manalo, Opalesque Asia: The month of April has marked the transition toward a new market regime, Philippe Ferreira, Lyxor AM’s head of research, managed account platform, commented in the May 5's Weekly Briefing. "The first quart

banner