The last few years have been a very challenging playing field to navigate. As a CTA one has to wear multiple hats while trying to grow a business. While our specialty is trading and risk management one has to realize this is a business that has to be run like one and while a CTA may be a great trader they also have to run a good business.
The last few years have brought more challenges in raising assets for a CTA than trying to navigate a political solution with Vladimir Putin. MF Global was a serious setback for the industry and if not for the tremendous work by James Koutoulas and John Roe the industry would have taken much worse of a hit. PFG was the next shoe to drop that provided a one two punch to the industry, which everyone is still recovering from.
As a CTA trying to raise assets during these times we saw a lot of good people who have interest helping CTAs raise assets having to either find a new place to work or left the business completely. On the asset raising side of course performance is one of the key drivers but institutions are looking for more. We are seeing when an allocation is being considered the institution is also looking at all aspects of the CTA’s business operations. Having multiple platforms and relationships set up for execution is helpful, but an updated DDQ and all aspects of compliance and disaster recovery is very important as well.
We have realized finding the right people to work with has been a challenge. As a CTA we want to work with people who not only can help us grow, but share the same passion that we have. People who help us raise assets and offer advice on all the other aspects of our business. We have found a few specific people have accomplished this. Managed Account Research (MARI) is not only a platform like so many others that report our numbers and is run by Jason Turnipseed. Jason has offered us advice on business development and also helps us raise assets even to go as far as help us create our logo. Altegris is another platform I highly recommend and specifically Max Eagye. The CTA Challenge they run is excellent and is a great tool to continue to get our name out there. I would advise any emerging CTA to enter into the CTA challenge. Finally Kevin O’Brien at Morgan Stanley is another individual who I can’t say enough good things about. Between the soft introductions and advice, it is a priceless relationship with his motivation is to see us grow.
There are plenty of people who will say put an account on our books or execute through us we will raise you money. One thing I have learned over now 20 years I have been in the business is we are very loyal people. As we grow I want to be surrounded with the people that have helped to get us there. The three organizations and people I mentioned are honest people that will tell me an answer even if I don’t like it. They want to see us grow and will help us on multiple fronts. If you can surround yourself with people with this outlook it becomes a little easier navigating the field of raising assets not only from HNW individuals but also institutions and family offices.
Tyche Capital Advisors was launched in 2006 and registered with the NFA and CFTC in 2009. The two principals are Tariq Zahir and Steve Marino. Tariq Zahir previously worked at DC Capital where he managed several billion dollar hedge funds. Steve Marino has an extensive background in writing algorithms, trading and risk management. Tyche Capital Advisors has 2 programs the first TCA Energy Spreads and the new launch this year of TCA Institutional Spreads.
Both programs are focused in the energy markets, specifically in the WTI markets and trade exclusively in calendar spreads throughout the forward curve going as far out as 2 years. The programs use a collection of proprietary quantitative and computer software algorithms and a discretionary overlay on signals.
Trading the energy markets is quite dynamic and not many CTA’s have taken on this challenge. On focusing specifically on calendar spreads (the widening and contraction of calendar spreads) with no outright or options we have found a niche and a market that is very liquid.
In raising assets we have seen we have to adapt to the environment we have been in over the last few years especially for a new launch. We realize that on the Institutional side of it with a new launch a 2% management fee is not in the cards. We have decided while this may not be popular with other CTA’s, that if we work on discounted management fees, or even no management fees is another unique approach. When a CTA is not relying on management fees it really conveys the confidence in the program for the long term. If the program performs we will be compensated with incentive fees.
One thing we are implementing with the TCA Institutional program is for the first block of money to come in we will do a 0 % management fee for the first 20 million. At that point we will go to a discounted management fee. While this is not the industry norm, with everything that has happened in the last few years we feel this is the best way to convey the confidence we have in the program and help raises assets in this tough environment.
As a CTA I would definitely say to pound the pavement and get your name and strategy out there. More importantly surround yourself will honest loyal people and you’ll be surprised how fast everything can come together.
Tariq Zahir