The professionals within this industry have their own trade association, the Managed Futures Association. Its function is to assist members, to promote the industry, and to advance the industry. They produce an excellent monthly professional journal that discusses issues important to members, everything from legislation, regulatory compliance, trade execution, to marketing. Their annual membership directory is an excellent source to find CTAs and CPOs.

Commodity pool operators are the individuals or corporations who structure funds. These are pools of commingled money from a number of individual investors. Most of the funds are large enough to require multiple CTAs. If the funds are properly selected, this further reduces risk, as we saw earlier. Most CPOs closely follow the performance of a large number of CTAs and analyze their performance. For this reason, CPOs can be excellent consultants in CTA selection. Read more »

Posted: March 4th, 2008 under Futures Index, Futures Market, Futures Options, Futures Prices, Futures Trading System, Managed Futures, investment.
Comments: 4

The investor who gets burned is the one who doesn’t do his or her homework. Spend time with potential traders. Find out how strong their passion for the market is. What sacrifices have they made? You can often tell the real McCoy from the con man by visiting their office. If it’s cluttered, filled with market data, that’s a good sign. If the candidate is more interested in the markets during trading hours than you, that’s another good sign. Interviews with their supervisor (virtually everyone who’s an insider is registered with the NFA and would have a compliance supervisor) may provide some insight. An independent CTA would not have a direct supervisor, but would have to clear trades through someone. Don’t forget the NFA Information Center. Read more »

Posted: March 4th, 2008 under Uncategorized.
Comments: 4

Mitchell is certain that good performance over the longer term is the only way to tell luck from skill, but if that type of data is not available, he has the following suggestions for evaluating shorter trader history:

• Using qualitative information to eliminate some lucky traders.
• Excluding all biased data including simulated track records and extracted trades.
• Basing the evaluation on a statistically significant number of events, rather than a statistically significant number of trades.

Read more »

Posted: February 4th, 2008 under Managed Futures.
Comments: 4

THE ORIGINS OF THE MANAGED FUTURES INDUSTRY

In 1949, Richard D. Donchian established what is believed to be the first managed commodity fund, Futures Inc., which was offered to the public in the US. This fund was traded until it was dissolved in the mid 1970s. Donchian was a broker at Hayden Stone and he applied a system to futures money management, based on the application of moving averages. Donchian’s initiative was not taken up by a large number of fund managers in the US and consequently managed futures funds suffered a temporary lull in their development.

The next development was that in 1965, Dunn & Hargitt became the Commodity Trading Advisers (CTA) for a managed commodity account. According to Thomas Northcote’s Major Events in the History of the Managed Futures Industry, the account was US$ 2000 and came under the direction of a non-broker CTA and traded at Lamson Brothers (now part of the Shearson Lehman Brothers Group). Says Northcote: ‘One of the more anachronistic policies of the CTA was that no women could open an account.’ The management fee was US$ 175 per year. Read more »

Posted: February 1st, 2008 under Future Fund, Future Trading, Futures Contracts, Managed Futures.
Comments: 3

Before the advent of managed futures funds in Europe, many European countries—but particularly the UK—suffered the attentions of unscrupulous and largely unregulated futures brokers. These unprofessional operators encouraged retail investors to open their own trading accounts, through which either the vicissitudes of the futures markets or the inflated nature of the brokers’ fees usually managed to ensure that the investors lost most of their money. Many of these unregulated practitioners arrived in Europe from the US, where the strict regulatory regime established by the Securities and Exchange Commission (SEC) or the CFTC had chased them out. The UK and continental Europe also managed to grow a few of their own cowboys.

Gradually, the introduction of a stronger regulatory regime across Europe and the growth of well-regulated managed futures funds — supported by their trade associations—have largely pushed the cowboys out of the forefront of the industry and out of existence, or into less well-regulated centres. Read more »

Posted: February 1st, 2008 under Future Broker, Future Fund, Future Investing, Futures Market, Managed Futures.
Comments: 5

The managed futures industry is a very young industry and gaining enough perspective on its performance to satisfy the requirements of academic study is difficult, even now.

The researchers who pushed on with Lintner’s work found that when they expanded the sample and changed the time periods or the computation of performance, Lintner’s original theories were largely upheld. Read more »

Posted: January 29th, 2008 under Future Fund, Future Trading, Managed Futures.
Comments: 4

Collapse of the Bretton Woods Agreement

Up to the First World War, the world’s currencies were described either as hard or soft currencies, depending on whether they were convertible into gold at a fixed or floating exchange rate.

In 1945, after the Second World War, the Bretton Woods Agreement was reached and was responsible for keeping a narrow band of fluctuation (2 per cent) between the US dollar, which was pegged and convertible into gold, and other currencies.

By the 1970s it had become impossible to keep so many currencies, each from countries with completely different economic growth rates, within the agreement, and so in 1972 it was abandoned. Read more »

Posted: January 26th, 2008 under Commodities Futures, Currency Futures, Future Exchange, Future Trading, Futures Contracts, Futures Market.
Comments: 3

The managed derivatives industry is, without doubt, still in its infancy. More developments and growth lie in its future than have happened in its past. Practitioners in the managed futures industry in Europe should not get depressed about how little headway they seem to have made, when they consider that unit trusts in the UK are 60 years old, and did not see huge growth in funds under management until the 1980s.

It must also be remembered that not only is the managed futures industry worldwide very young, it is also very small. This is a niche market with US$ 13-15bn, maybe US$ 21bn, under management. To put this into perspective, it may be helpful to remember that a single fund group such as Fidelity has US$ 153bn under management. Read more »

Posted: January 26th, 2008 under Future Fund, Future Investing, Future Management, Managed Futures.
Comments: 4

DEMOGRAPHIC CHANGE AND AGEING POPULATIONS

In Europe as a whole, one of the greatest features of demographic change over the last century has been the dramatic increase in life expectancy. Currently, one third of the population of Europe is over 50 years old. For the financial industry, the result has been that the pension industry in particular is looking for more return on the capital it has under management.

With people generally living longer on less capital, actuaries within pension fund groups need to find routes for greater returns on money under management and many are more prepared to look at derivatives than they have been in the past. While many actuaries or pension consultants may consider looking towards derivatives for added returns the last action of desperate men, they are at least looking—which is a vast step forward.

For any manager of institutional money who is looking Read more »

Posted: January 24th, 2008 under Future Broker, Future Exchange, Future Management, Futures Quotes, Futures Trader, Managed Futures.
Comments: 4