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Matt Osborne
Altegris Draws on Genworth Synergies
2010 was a notable year for managed futures and hedge fund allocator Altegris.
Genworth Financial, a publicly traded company that started as an insurance
business but is now a major wealth manager with more than $100 billion in
assets, acquired Altegris. Another interesting development was the launch of a
mutual fund, the Altegris Managed Futures Strategy Fund, which allocates to
trend-following and specialized CTA strategies.
To get an in-depth understanding of what's going on, we talked with Matt
Osborne, co-founder of the Altegris group of companies and executive vice
president and managing director of Altegris Advisors. From his discussion below,
it sounds like the firm is in the vanguard of the movement to bring managed
futures to a larger population of investors.
For more on Altegris, see the interview with chief executive and co-founder Jon
Sundt in our July 14, 2009, issue.
"Over the years we have built a reputation for matching emerging CTAs
with sophisticated investors who are early adopters."
Opalesque Futures Intelligence: How did you come to co-found Altegris?
Matt Osborne: I am from New Zealand and early in my career worked for a
family office there. Then in 1996 I moved to the United States and the next year
joined Man Financial, where I worked with Jon Sundt. We formed Altegris in 2002.
All in all, I've been allocating assets to hedge funds and managed futures since
1988.
OFI: You and Mr. Sundt no longer own Altegris. What does that mean?
MO: Altegris became part of Genworth Financial Wealth Management at the
end of 2010. There is a huge amount of synergy between our products and the
services Genworth offers, so the opportunities are great. Everybody is very
excited.
OFI: Are you moving to a Genworth office?
MO: No, we're not moving anywhere. We're very happy where we are in
Southern California.
OFI: Altegris has an entrepreneurial culture. How will that fare in a
large organization?
MO: Genworth Financial is a global financial services company with a very
well established wealth management division, which is where we report to. At the
same time, Genworth is intent on maintaining the integrity of the Altegris brand
and culture. So for us it is mostly business as usual, but we do want to make
sure that the products we develop fit the wealth management platform.
OFI: What kind of products will you develop?
MO: Genworth offers an extensive asset management system through a broad
network of financial advisers. We believe alternatives have an important role to
play in investor portfolios and look to develop alternative investment products
that will meet the needs of financial advisers and their clients. We've already
introduced a managed futures mutual fund.
OFI: How does the new Altegris Clearing Solutions fit in?
MO: We've had an introducing broker business since Altegris was formed.
Now we're separating out that unit to provide a specialized service to meet
unique client needs. Altegris Clearing Solutions offers segregated accounts.
OFI: There are a number of managed account platforms. What made you
decide you want to expand this business?
MO: First of all, I want to differentiate between this clearing business
and managed account platforms. There is a difference between a segregated
account that the investor holds versus investing via a pool or managed account
platform. Many of our clients want the additional flexibility and access that
they get with their own segregated private account. We are a conduit to a lineup
of clearing brokers-futures commission merchants that we have relationships with
as an introducing broker. Through them we can create an account that suits a
client's particular needs. FCMs have particular criteria for clients that want
to open segregated accounts. We can help clients make their way through those
choices. This business is distinct from our other businesses. It will now be a
separate unit.
OFI: Do institutions use segregated accounts?
MO: There is a range of clients. Institutions, yes, but also family
offices, funds of funds, ultra high-net-worth investors, commodity pool
operators. Commodity trading advisors themselves are also clients-they may have
their own proprietary accounts and want exposure to a firm like Altegris to
potentially tap into the investor base. Over the years we have built a
reputation for matching emerging CTAs with sophisticated investors who are early
adopters. That will continue to be the profile of Altegris Clearing Solutions.
OFI: Are there promising emerging CTAs?
MO: Managed futures is probably one of the fastest growing investment
spaces. We've been in this space a long time. There are always promising
emerging CTAs but also, unfortunately, a high turnover of CTAs. It is very
difficult to develop a sustainable CTA business and grow it. The Altegris 40
Index represents close to half the assets in the industry-that tells you a lot
about the concentration of talent and how difficult it is to achieve a
sustainable CTA business. We make a constant effort to add CTAs to our database.
OFI: What happened to CTAs in 2010?
MO: It was difficult up until the last quarter of the year for trend
following managers. That last quarter made the year for a lot of managers.
Definitive trends in particular in commodities took hold in the last four to
five months of 2010. That gave trend followers opportunity to deliver
double-digit returns for the year. The Altegris 40 Index is up 11.3% and most of
that return came since August.
OFI: What about other futures strategies?
MO: We saw a mixed bag. Some specialized strategies like agriculture
specialists were able to participate in the upward movement of grains prices and
did well in 2010. But at the same time other specialized managers had a tough
year-for example, currency traders suffered from the rapid reversal in the euro.
So specialized managers were all over the map with a wide dispersion of returns.
OFI: How does 2011 look so far?
MO: Trend followers are positioned for trends that favor global growth
and reflation, which is a reasonable scenario. Managers are generally long on
commodities and stock indexes and beginning to go short on long-dated fixed
income contracts. Global reflation trends are likely to continue but there could
be a fair amount of volatility due to shocks to the underlying consensus,
whether geopolitical shocks like recent events in the Middle East or
disappointing economic data that throws doubt on expected outcomes. Shocks that
cause short-term trend reversals could adversely affect returns.
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