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Managed Futures

May 12, 2023

4 min read

CTA Connection Sponsored Content: Working with the IASG Database

While industry veterans in the futures space understand the value of CTAs in a portfolio, hedge fund assets under management dwarf those AUM totals by over thirteen times. To explain it like one of my traders, “There is a multi-trillion-dollar industry pushing stocks no matter how they perform.” We do not have that luxury as investors come to us looking to steady their portfolio and ultimately hold us to a more demanding standard. After all, the marketing machine is owned by our competition. This puts the value of reaching potential prospects at a higher premium. Each conversation is one more that we can position to help someone now or down the road. So where does one look for these investors? If we start with the expectation that most of the desirable clients will be QEP qualified, we immediately cut off 90.3% of the population of the United States who fall...

Advantages of a traditional portfolio allocating to a volatility index

For decades, investors frequently perceived a traditional portfolio allocation in the range of 60 percent equities and 40 percent bonds for proper diversification. Since 2000 investors, both large and small, have experienced several moments of negative returns to their portfolios. This experience has enlightened many investors to seek wider portfolio diversification in attempts to reduce their correlation risk, tail risk and negative volatility. As investors search for greater diversification, it begs the question, is there an added value to allocate some portion of a traditional portfolio to a volatility index, such as VSTOXX® Futures? Investors often view each component of their portfolio as a standalone investment. Ultimately asset allocation is about how each portfolio component compliments the entire portfolio. Asset allocation should be viewed as a holistic approach to portfolio management. READ MORE Mark Shore Shore Capital Research LLC Alternative Investment Research & Consulting http://www.linkedin.com/in/shorem http://www.shorecapmgmt.com https://twitter.com/shorecap Decoding the Myths...

Why you should get involved in managed futures

Happy New Year everyone! With the holidays behind us, I thought this would be a good opportunity to look at new business opportunities for the upcoming year. I work almost exclusively in the managed futures space. In speaking with brokers, I have found that they tend to be segregated into those who work primarily in transactional business, retail brokerage and hedging, and those who focus on managed futures accounts. Many transactional brokers know that commodity trading advisors (CTA’s) are out there, but they don’t know how they can become involved in that side of the business. The first question one should ask is, “why should I get involved with managed futures?” The biggest objection I run into when talking with transactional brokers is giving up control over trading their customers’ accounts. This is a natural reaction as nobody likes to give up control over their business. But I’m going to...

Volatility and Risk

It is very difficult to separate the concepts of volatility and risk, the two are intimately intertwined. Look no further than the pending Federal Reserve rate decision at time of this writing. Most traders have taken to the sidelines to wait for the decision from the Federal Reserve. Will they raise rates? Will they keep rates the same? Will they not? This is been the permeating question during this last quarter. It is also a question of value. How much does the answer impact in the markets. As a result, strategies are formed, and bets are placed, and risk is managed accordingly. The concept is quite simple but is sometimes difficult in practice. Commonly referred to as the three C's; First there needs to be a concept of what's going on, second one must have conviction to initiate positions, third (and possibly most importantly) there better be a contingency plan...

Decoding the Myths of Managed Futures 2015

This paper examines seven very popular myths and misconceptions held by both retail and institutional investors regarding managed futures. This paper updates the original version written in 2011. These myths have persisted for several years. As investors are becoming more aware of the potential use of managed futures for asset allocation and portfolio diversification, knowing if the myths are true or false, is critical for an investor’s understanding and appreciation of managed futures. READ MORE

2014 Commodities in Review

2014 had its share of commodity headlines. With the year now completed, this is a good opportunity to review the previous year of the commodity markets. There was something for everyone as some commodity markets rallied, but many commodity markets declined in 2014. Several of the markets experienced price lows not seen in several years. The last several months of 2014 will definitely be known for falling oil prices as the topic found itself constantly in the headlines and in the conversation of the business, economic and political news. Besides energy, the metals and grain sectors made significant lows. One of the largest commodity moves in 2014 occurred in the rally of the coffee market. The meats sector made new highs last year. To see full article click here Mark Shore Shore Capital Management LLC

An analysis of why volatility indexes are relevant

Financial markets are about making decisions in moments of uncertainty. The one certainty one can make is that no one has a crystal ball, nor can anyone predict with certainty what will occur in the future. Although seeking methods to manage portfolio volatility and tail risk may fall out of fashion from time to time based on market sentiment, it should always be utilized as part of the risk management process. Volatility indexes are instruments that may assist in the risk management process. Table 1: VSTOXX® Futures yearly volume and open interest as of October 2014 Source: Eurex Exchange’s monthly statistics In the capital markets when participants ask if a product is still relevant is often when the product finds itself out of favor. Sometimes that is when the product is at its lowest point just before it becomes relevant again and back in favor. This was exactly the situation...

Master of One: The Specialist CTA

Over the past 10-20 years the client/broker relationship has fully evolved from a transactional one to a consultative one and appropriately to the client’s benefit.  Where commissions and fees used to be major elements of the sales cycle, now portfolio construction and access to alpha are key selling points toward attracting and maintaining investors.  This combined with an expanding universe of managed futures investments to choose from have brokers and advisors, now more than ever, charged with sourcing new and differentiated Commodity Trading Advisor (CTA) strategies and then building balanced, stable portfolios out of them.  Given this evolution and for ease of communication I will use the terms ‘portfolio advisor’ or just ‘advisor’ to indicate the person building the multi-CTA portfolio and ‘CTA’ to indicate the constituent Commodity Trading Advisors that are combined to form the portfolio. In this article we will: Define two basic types of CTA strategies Discuss...

CTA Insights: Stockyard - An Overview of the Basics of Livestock

Stockyard Trading is a fundamental, discretionary program that trades strictly livestock - cattle and hogs. Like most fundamental agricultural traders, we spend a great deal of our time evaluating and formulating our outlook on these markets.  It is our experience and extensive knowledge of the commercial livestock industry that provides us an ongoing informational edge in trading these markets.  For those of you less versed on the commercial livestock industry, we thought we would take this opportunity to share some of the basics with you - structure and factors - that shape these markets. First, let’s talk about the cattle market. The first stage is cow/calf operations where the cows gestate for 9 months, calved [birthed] and kept until they are weaned - usually about 6 months.  The cattle are then transferred to a backgrounding operation where they are put out to pasture to grow and increase weight - approximately...

CTA Insights: Novodyn Advisors on Risk Management

It’s All About Risk Bruce Schneier, an author who wrote about how we perceive danger, outlined cognitive biases people fall victim to when making decisions about risk (Housel, 2011). Although general in nature, they apply to investing, specifically diversifying, or the lack there of.  The unknown is perceived to be riskier than the familiar. Schneier's example: "People fear kidnapping by strangers when the data supports kidnapping by relatives being much more common."  In investing: The Flash Crash in 2010 caused untold anxiety. Years later, it is still frequently mentioned as a serious risk to markets. In reality, though, it was a non-event. The entire event came and went in a few minutes. Most investors didn't even realize it occurred until it was over and losses were reversed. What made it scary is that it had never happened before and was so unexpected. Meanwhile, the risks posed by the herd mentality...

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