Managed Futures Education Center

DePaul University Once Again Offers MBA Level Managed Futures Course

Mark Shore, Adjunct Professor of managed futures at DePaul University’s Kellstadt Graduate School of Business in Chicago and Founder of Shore Capital Management, a managed futures consulting & research firm, finds an increasing demand to understand managed futures.   “There is a growing interest to understand non-correlated assets and reduction of tail risk” Shore said.  [...]

Why Bry / Jafferian NFA Memo is Historic Turning Point

At what point is the financial services industry going to make a stand and say enough is enough?   As MF Global exploded and the core protection of customer segregated funds was destroyed under questionable circumstances, arguably the most significant event in the history of the futures industry, isn’t it interesting to note that the [...]

What? MF Global European Sovereign Debt Not Enough of an Issue For S&P? Since when?

European Sovereign Debt Ended Up Falling Apart Well Before US Sovereign Debt    In testimony before Congress today, Mr. Craig Parmelee, Managing Director, Corporate and Government Ratings Division, Standard & Poor’s (S&P) Rating Services, is expected to disclose the ratings firm had knowledge of MF Global’s sovereign debt positions as early as the spring of 2011.  What’s interesting [...]

Architect of Broker Dealer / FCM Liquidation Process Goes On the Record Regarding SIPA Liquidation Process

Account Segregation Protections Critical To Futures Market Stability, SIPA Law Has Protections Covering BD/FCM Liquidation, Says Law Architect   While MF Global bankruptcy court trustee William Freeh has been arguing against MF Global segregated account holders receiving priority treatment in the liquidation proceedings, interesting voices are emerging to set the record straight.   On January 18, the [...]

Why Protecting Investors Matters At This Moment In History

A few people asked questions regarding the basis for positive opinion regarding MF Global investors recouping 100% of their investment capital.  This was particularly the case after this November 23 radio interview on the Clear Channel radio network (click here for the radio interview).  After frank discussion of the debt issue, what was then described as a [...]

Jon Corzine’s History Toppling Government Regulators Should be Questioned

Note: This article is subjective and significantly represents the opinions of the author.   With all eyes focused on Jon Corzine’s testimony relative to MF Global Thursday, perhaps it might be time to consider that MF Global might only be one act to consider in this multi-act and often undisclosed tragedy.   The whispered story [...]

Despite Friday’s Market Cheer, Debt Crisis Won’t End Quickly. Here’s Why:

When voters meet difficult austerity measures, investors should get ready for a volatile political and market environment. To assume that the debt crisis is over because a change in leadership occurs is to assume that the budget problems and fiscal austerity required will be able to tucked away from public view without facing voters. The rubber meets the road in the government debt crisis only after voters face the truth, and part of the problem is government secrecy on the issue

Volatility leads to price persistence: How managed futures managed the past week

The past week has been interesting to say the least. Yet another debt-inspired volatility spike hit equity markets, as the contagion spread to commodity markets as well.

Overall this volatility spike appeared to be significantly positive for certain types of trend followers and reasonably neutral for spread arbitrage programs. Many short volatility programs were hard hit, with some notable exceptions being the diversified short volatility programs that hedge their risk exposure. Those diversified managed futures programs that included a long gold volatility hedge to short volatility option selling programs encountered degrees of temporary difficulty.

If investors don’t understand how a strategy works, they can’t understand risk

Yesterday I had painful dental surgery to remove a tooth.  As I was in the dentist’s chair, I was thinking about managed futures risk.    Previous to the dentist entering the room, the assistant prepped me on what was about to occur.  Although the pain shooting through my mouth and giving me severe migraine headaches [...]

S&P Launches new managed futures index at interesting moment in history

S&P’s new managed futures product, S&P Systematic Global Macro Index (SGMI), is interesting from a number of perspectives, but also raises questions.

What is S&P’s motivation for entering the managed futures space with a new product at this moment in economic history?

Will the new index really represent broad managed futures with a singular strategy, trend following, which represents approximately 60% of the managed futures universe? More specifically, with the SGMI’s singular formulaic approach, similar to an individual trend following CTA, truly represent the broad range of managed futures programs in the industry?

Is now the time to invest in short volatility options programs? A study of past performance

The recent market volatility is a good point at which to consider the option writing category.   There were significant winners and losers during the recent bout of market volatility.  In particular, diversified option seller FCI recently recently experienced reported losses of approximately -45% in the “uncovered” OSS option selling program and -18% in the [...]

Debt Issue & Tough Choices Far From Over — Case for Managed Futures

While an agreement on the debt ceiling issue appears to be in the works, this is by no means the end of this issue, but rather more a warning shot fired across the bow of the US economy.   The debt agreement, if passed this Tuesday, provides enough loopholes and wiggle room for Congress to [...]

Explaining Managed Futures When it Doesn’t Work is Most Important

It could be said the most important time for an advisor or knowledgeable professional to explain managed futures is when the investment isn’t “working.” Managed futures is currently running through one of its inevitable rough patches. This is the period of time when investors may be calling their advisors asking if the asset class is [...]

Why is managed futures subject to a double standard when compared to stocks?

Managed futures is so accustomed to playing second fiddle to the stock market, we’ve almost institutionalized many of the double standards that occur in everyday life. Today I take a look at some of the double standards that we might want to examine: “Unregulated” Industry: It’s humorous when comments are made that suggest the managed [...]

Author Meet and Greet at Managed Funds Association Conference

The investment industry’s fastest growing asset class is going through tremendous change. Managed futures mutual funds, new regulation and oversight rules, converging accounting standards and increased interest from the traditionally equity-focused Wall Street financial advisor community all impact your firm’s future. Cortland Fund Services, a leader in helping managed futures CTAs and funds support their burgeoning [...]

Barron’s Magazine Article On Managed Futures ETF Raises Questions

Barron’s Magazine ran a managed futures article in the back of the print publication this past weekend (Managed Futures Strategies Prove a Big Draw), and without likely knowing it the article touched on a somewhat controversial industry topic when it featured the Wisdom Tree Managed Futures Strategy Fund ETF. While the increasing media attention to [...]

The Truth About Market Crashes, Liquidity and “Evil Speculators”

While rise in oil prices was nothing more than a reflection of price discovery and the sometimes irrational opinions of market participants and their views on the future price of oil, the markets and industry are nonetheless vilified through rants of “evil speculation” driving the price needlessly higher. However, even the most simplistic analysis of the energy and commodity markets recognizes a world of finite assets and increasing global demand in a geopolitical climate that can only be described as increasingly unstable.

Strong Managed Futures Voice Emanates From Financial Capital

The New York CTA Expo was again an interesting event, punctuated by topical presentations on CTA evaluation and risk management, the US background of economic debt and investment industry regulation in a post-Madoff world. After opening remarks, event founders Frank Pusarati and Bucky Isaacson unleashed a strong speaking lineup that addressed key issues in managed [...]

Conversations with Financial Advisors Yield Insight into Managed Futures and Modern Portfolio Theory

I engage in many conversations in open chat forums on the Internet.  Below is one edited conversation with a group of Registered Investment Advisors (RIAs) that I found particularly interesting.  The topic was “Is Modern Portfolio Theory Dead,” and was essentially being discussed by individuals who utilized stocks for portfolio “diversification” — assets highly correlated [...]

Managed Futures Mutual Fund Regulation Highlights Clash of Ideals in DC

Discussions currently taken place within the walls of the Commodity Futures Trading Commission (CFTC) will not only shape the future of the fastest growing investment industry, but could provide a case study in how certain types of regulation can work with an industry and how certain types of regulation can work to drive industry participants [...]

New Work on Managed Futures Performance During Crisis Provides Interesting Perspective

Managed futures performance during prolonged bear markets and stock market crisis is no accident.  Academic reports showing close to a 90% success rate during times of crisis may seem odd, but once the underlying performance drivers are understood the investment becomes clear. The CMEGroup recently published two academic white papers of note, both reports written [...]

Comment from book reader: Looking into Future

I receive great comments from book readers who add to the insight provided in the book, I will start to post the more insightful comments:

My favorite part of the whole book was the section on picking the top 20 CTAs with worst drawdowns and then taking 8 of those that are uncorrelated to each other and seeing the results. Unbelievable!

Managed Futures Today Magazine Tackles Segregated Account Protections

Investor protections such as account segregation might not seem like a sexy topic, but it is a very important point of distinction with managed futures.  In fact, what is perhaps most interesting is that none other than one time de-regulation leader Alan Greenspan has been on record as changing his tune when he considers the benefits [...]

Sold Out CTA Expo Releases NY Schedule

If there is a reason the CTA Expo continues to grow in popularity it has to be in part due to the excellent speaker schedule.  Coming off last November’s event when a diversity of speakers made interesting points, including John Lothian telling his story to the advent of the managed futures mutual fund being discussed [...]

Northwestern University Managed Futures Course Re-broadcast Live this Saturday

The Northwestern University Managed Futures course is being re-broadcast live this Saturday from 10 AM to 2 PM CST time. Anyone who registers at the Northwestern University web site will have access to the seminar for one month after the event. The previous seminar and audience was fascinating. We started the course by defining the investment from a mathematical perspective, something not often done. Then the important connection between the mathematical nature of the investment class and its implications on performance generators were discussed. Once investors understand how performance is generated, they get a better sense of the opportunity and comfort with the investing method in general.

The second hour of the course touched in the structure of the investment: its variable investor protections, liquidity, volatility and performance relative to the stock market.

The third hour moved from the “what” and “why” questions to the important “how” questions. In this section a specific method of performance evaluation was revealed, which was followed up in the fourth hour by details regarding how to information for building uncorrelated portfolios, potential investment entry and exit points and specific risk management techniques.

Northwestern University Managed Futures Course Syllabus Released

This course provides unique insight into managed futures from a new perspective. It starts by defining managed futures from a statistical standpoint, revealing how this often mis-understood can be so uncorrelated to almost every market, including the markets in which the CTAs invest. The course highlights the importance of the CTA strategies and shows the market environments when the strategies work and importantly don’t work. It identifies hidden risks and shows how to manage those risks through some very innovative programs. This is a must attend event for anyone serious about managed futures and equity neutral investing.

Managed Futures to Reach $3 Trillion: Bold Goal or Logical Projection?

An article in the NIBA Journal I wrote notes that industry discussions are eying a target of $3 trillion in managed futures assets under management. That’s a long way from the current level of $267 billion.  If this were to come even close to true, the resulting explosive growth would not only be historic in the cloistered futures [...]

Top Managed Futures Traders in 2010; Eckhardt Interview; Decoding Myths; CTA Expo

2010 was a big year for managed futures, as the asset class grew 25% larger to end 2010 with $266.8 billion under management, the most assets under management of any hedge fund strategy (although, as I point out in the book categorizing managed futures as a hedge fund strategy might be considered lazy categorization.)
Futures Magazine recently released their annual Top Traders of 2010 issue and it is worth a read. It is interesting to note that a vast majority of “large” traders on the list, with returns ranging from 68.99% to 44.67% over the course of the year, had assets under management of less than $100 million.

New Report Released: Crisis Performance and Managed Futures Investments

This report is designed to identify performance characteristics of managed futures investments that have, in the past, managed stock market crisis with minimal reported drawdown consequence. The report walks readers through a proprietary elimination filtering process that results in a list of commodity trading advisors (CTAs) who have performed positively during past crisis. While past performance is not indicative of future results, the combined performance statistics of this group are indeed enlightening.

This report highlights how there is significant difference between levels of CTA skill and how they manage risk during crisis. In part this white paper is designed to educate investors on a particular risk that is not evident when considering headline performance numbers.

DePaul University Announces Managed Futures Course

Chicago’s DePaul University recently announced a managed futures course for graduate students. “Managed futures and its tendencies of non-correlation to the stock market and long optionality should be understood by our future financial professionals,” Mark Shore, the course instructor said. “Tail risk and asset correlation risk are important aspects of portfolio management.” The course will [...]

Coming Next Week

The following will be released next week: Margin to Equity Study: With all the recent talk about margin to equity as a risk management tool, subscribers will be given access to CTAs utilizing the highest and lowest levels of margin usage along with author analysis. Crisis CTAs: Subscribers can access a premium white paper providing [...]

Managed Futures Ability to Generate “Crisis Alpha” Is Examined

Futures Magazine recently published a strong research piece on managed futures performance during crisis. The report, written by MIT lecturer and investment researcher Kathryn Kaminski, points to how managed futures provides what she terms “Crisis Alpha,” the ability of an investment to perform positively during times of stock market crisis. This is a significant topic, [...]

WSJ / Dow Jones Tackle Third Rail of Margin to Equity

Margin to equity ratios have always been a critical method to evaluate and manage risk in managed futures, but the topic never had the “sex appeal” to make the headlines. It evokes that “scary” word, “leverage,” that ignites memory of the generally non-transparent mortgage derivative mess or countless hedge fund scandals.

Wall Street Journal asset management reporter Marshall Eckblad tackled a difficult topic: report in short form a complicated managed futures topic in an entertaining and informative format – while touching the third rail of hot topics in managed futures, margin and leverage usage.

Northwestern University Announces the Establishment of Managed Futures Course

In a video press conference held in Chicago, Northwestern University announced a university course dedicated to the study of managed futures. Matt Hlinak, Academic Coordinator for Professional Development Programs at Northwestern University, said, “This is an exciting addition to our program, really part of a new movement, a largely ignored asset class, managed futures.”

“It’s interesting to note our point in history,” course instructor Mark Melin observed. “There is a need in society for an investment product not necessarily tied to the performance of the stock market or economy at large. When I started writing this book in 2008, I would ask financial professionals if they had any interest in managed futures, and the answer was widely ‘no.’ Fast forward two and a half years — now, a current Morningstar study shows managed futures as the asset class with the highest growth potential over the next five years.”

Morningstar Documents Growing Trend

In their “2010 Alternative Investment Survey of U.S. Institutions and Financial Advisers,” equity-based research firm Morningstar noted an important trend sweeping the investment landscape: the growing use of alternatives among both institutional investors and even retail-based financial advisers, but more interesting the predicted rise of managed futures as the “go to” alternative. Not only does [...]

Opalesque Reveals Fascinating Managed Futures Study

Alternative investment publisher Opalesque recently reported on a fascinating study showing how certain managed futures strategies can in fact be correlated to the performance of the stock market.  ”It is often said that managed futures… are market neutral; they are investments that are not correlated to the rest of the market,” the article started. The [...]

NFA Adds New Risk Disclosure Requirement

There has always been an interesting debate in the investing arena regarding incentive fees. One camp is against incentive fees, saying it provides the trading manager incentive to take undue risks with the investor’s capital to achieve short term gains.  This group generally says the fees in managed futures are too high and the investor is taking [...]

New Managed Futures Research Tells the Story

There are a lot of reasons to like this well-researched article, including the author’s recognition for the value of investor protections and transparency. This is particularly odd coming from a fund manager. Typically, in the equity world it is the hedge fund manager who is fighting transparency and investor protection. It should be noted that in managed futures, industry participants generally favor intelligent investor protections.

The downfall of a great society might be summed up in one word: sacrifice. Or, why equity neutral investing with managed futures can no longer be ignored or misunderstood.

The New York Times recently ran a pretty amazing article, a sign of the times that points to what could be an uncertain economic future.  The article focused on a wealthy New York county whose governmental leaders cut taxes but did not reduce spending. When faced with a significantly growing budget deficit, politicians often take [...]

Industry Updates: All I want in an investment; Attain Questions Modern Portfolio Theory; Tracking Google Search Keywords

I want an investment that is transparent, well regulated, liquid and has strong performance… I was having lunch with Mark Shore the other day (chopped salad at Ceres… it had been a long time and I love the vibe of the old time guys who hang around after 1:00).  Among other experiences, Mark wrote a [...]