Managed Futures Roundtable: CTAs vs. hedge funds and the battles of second generation algorithms (aka “robots”)

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Since the end of 2008, the markets have been a little trickier for a lot of managed futures funds. The environment has been different, but this has allowed many of the fund managers to incorporate new data into their research process and adapt accordingly. And one should bear in mind it is not the first time that this has been a challenging market environment for CTAs and managed futures funds. In fact, the industry has “died” several times - and revived when the market provided opportunity. And this always happens.

During this Roundtable, we discussed new developments, returns, risk-off moves, long term and short term strategies, artificial intelligence, assets, start-ups, CTAs vs. hedge funds, macro-economics, technology, algorithms, MF Global, CTA vehicles, price momentum, now-casting, volatility, currencies, social media, black boxes, and an investable wide-ranging CTA index coming to us soon.

More specifically, the following points were tackled:

How managed futures strategies handle macro-economic instability;
Why the returns have been quite flat since 2009;
Why CTA investors are putting their money mostly in brand names and long-term strategies;
How can one make investors comfortable with the concept of CTAs (and not just call them black box)?
The institutionalization of the CTA industry;
Correlations of short-term traders and long-term traders;
What to take into consideration when looking to invest in a new fund;
The difference between hedge funds and CTAs;
The extent to which the managed futures business is linked to technology; and the difference between research technology and trading technology;
The use of economics with a purely quantitative approach; and the problem of over-fitting;
Discipline: why it is important in a trader;
The battles of second generation algorithms (aka “robots”);
Two NFA board members’ take on the MF Global and the Peregrine Financial Group events and related regulations;
Different vehicles that give investors access to CTAs, now and in the future;
Managed futures funds hubs;
Price momentum, the missing factor which helps understand the sources of return;
Nowcasting, the real-time processing of macroeconomic data;
How CTAs handle volatility;
The difficulties of currency trading, opportunities in emerging market currencies, and the fate of the euro;
Potential research using blogs and social media;
The creation of an investable index in the managed futures space that is actively managed and will capture the core returns of the industry.

This Opalesque Managed Futures Roundtable was sponsored by Efficient Capital Management, and our 2012 Roundtable series sponsor Eurex. It took place on September 21st, 2012 at the famous Chewton Glen Hotel in Hampshire, England. The participants were:
Ernest Jaffarian, Efficient Capital Management
Grant Jaffarian, Efficient Capital Management
Sam Gover, Altiq Asset Management
Kevin Murphy, Axiom
Doug Bry, Northfield Trading
Michael Brandt, QMS Capital Management LP

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Wed, 25 Jul 2012

Opalesque Roundtable Series - U.K. 2012

Managed Futures Roundtable: CTAs vs. hedge funds and the battles of second generation algorithms (aka “robots”)

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