The city of Chicago is largely dominated by CTAs and proprietary trading firms. The proprietary trading firms have migrated off the trading floor and therefore have a very different mindset from most other market participants. They don't have investors, so they are not worried about things like “What is this idea going to do for the volatility of my strategy? If I change, am I violating the mandate of the fund? What will the pension board think about my style drift?” All they think about is: Am I going to make money?
When you free yourself from the external restraints and just say “all I care about is making money”, then it fosters a very innovative and outside-the-box thought process. It has become the dominant culture in the city itself and bleeds over to the fund managers. Therefore, the culture and mindset is different from anywhere else in the world.
The Opalesque 2013 Chicago Roundtable was sponsored by FfastFill, Eurex and Taussig Capital and took place in October 10th with:
Alex Brockmann, Portfolio Manager, TradeLink Capital
Chris Dopp, Senior Vice President, Eurex
Emil van Essen, CEO and CIO, Emil van Essen CTA
Paul MacGregor, Managing Director, Product Strategy (Europe), FFastFill
Scott Schweighauser, Partner, President, and Portfolio Manager, Aurora Investment Management
Sorina Zahan, PhD, Partner and CIO, Core Capital Management
The group discussed fundamental trends and developments relevant for both investors and alternative investment managers:
The Field of Opportunities:
Credit, long/short stock-picking, volatility, event-driven, CTAs: best time to invest is when performance is “really bad”
Alternative 40 Act Funds:
explosive growth as retail investors start understanding strategy benefits
from passive long only commodities to active alpha – can term structure movements predict commodity prices?
Clearing houses to provide capital efficiency through margin offsets, new gateways for SEFs (Swap Execution Facilities) make way for aggregation tools and include swap futures.
When can 40 Act Funds blow off? Is it risky when pension and sovereign wealth funds start doing more trading on their own? Why is a rising volatility the unrecognized time bomb for most common risk models?
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