A US investor has purchased Sterling Treasury bills and wishes to hedge against the falling value of Sterling. Buying the out-of-the-money put (strike price $1.8500) will protect against a fall below that figure. The sale of the out-of-the-money call at $1.8900 will mean that the investor will benefit from any rise in Sterling to $1.8900 but not above that figure. The cost of buying the put is off-set by the revenue from writing the call, resulting in this instance in a zero cost strategy.

The reader will note that if Sterling rises above $1.8900, the written call position will make a loss. This is off-set by the rising value in dollar terms of the underlying Sterling investment. Conversely, if Sterling falls below $1.8850, the puts make a profit which off-sets the currency losses on the investment in the Sterling Treasury bills. Read more »

Posted: June 22nd, 2008 under Commodities Futures, Currency Futures, Equity Futures, Future Fund, Futures Contracts, Futures Options, Futures Spreads, Futures Trader, Futures Trading System, Managed Futures, S&P Futures.
Comments: 4

Embarking on a marketing effort with the major European financial centers as the initial focus is, however, extremely arduous for new, particularly non-European, groups.

Given appropriate lists of contacts, one-on-one meetings can be arranged relatively straightforwardly, but their effectiveness is dependent on a series ofcriteria beyond the chemistry of the meeting itself.

Press relations, actively undertaken, will serve both to boost familiarity of a fund management group and, moreover, can prove a valuable information source to the group as well as from it.

Over the past few years, the European press has increasingly reacted positively—with certain exceptions—to the derivatives industry as a whole and to managed derivatives in particular. Read more »

Posted: March 17th, 2008 under Uncategorized.
Comments: 4

Embarking on a marketing effort with the major European financial centers as the initial focus is, however, extremely arduous for new, particularly non-European, groups.

Given appropriate lists of contacts, one-on-one meetings can be arranged relatively straightforwardly, but their effectiveness is dependent on a series ofcriteria beyond the chemistry of the meeting itself.

Press relations, actively undertaken, will serve both to boost familiarity of a fund management group and, moreover, can prove a valuable information source to the group as well as from it. Read more »

Posted: February 17th, 2008 under Future Management, Future Trading, Futures Quotes, Managed Futures.
Comments: 3

European Institutions

The preparedness of European institutions to purchase either managed derivatives funds or programmes varies across the continent and is dependent upon a series of factors some of which may be addressed by marketing.

1. The regulatory (and tax) environment;
2. general familiarity with the derivatives and managed derivatives industry;
3. familiarity with the fund management group attempting to sell product;
4. presence and format of a track record (at least for past funds if a new product is offered);
5. money under management within the fund group;
6. technical expertise within the fund group;
7. performance aspirations for the fund or investment programme;
8. quality and content of the explanatory/sales materials;
9. financial considerations such as fees implicit within the fund or programme.

Read more »

Posted: February 11th, 2008 under Managed Futures.
Comments: 4

Within the context of the managed futures industry in Europe, there are, looselydivided, six marketing objectives depending on the product being offered and the type of company or group which is offering it. These are:

sales of funds or management programmes to investment institutions;

• CTAs attempting to manage money within (usually) multi-manager funds or equivalent investment products;
• sales by fund management groups, to expatriate retail investors or, increasingly (with domestically registered funds) to retail investors within their own countries;
• fund management groups seeking joint venture partners for the creation and distribution of funds (usually retail) within an individual country or economic block;
• fund management groups seeking sales agents to distribute products on a commission basis in a defined area;
• consultancy groups attempting to act for investment management groups — particularly those considering multi-manager derivatives funds, to structure the fund, select CTAs and control asset allocation.

Read more »

Posted: February 11th, 2008 under Managed Futures.
Comments: 3

GUERNSEY (CHANNEL ISLANDS)

Futures funds can be set up in Guernsey as unit trusts or investment companies, either closed- or open-ended. Open-ended funds are regulated by the Guernsey Financial Services Commission (FSC) under the Protection of Investors (Bailiwick of Guernsey) Law 1987.

Closed-ended funds are regulated by the Advisory and Finance Committee under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989, although the FSC looks after all funds on a day-to-day basis.

Guernsey’s FSC has a wide responsibility, including protecting and developing Guernsey’s shares of the lucrative financial services industry. This means that only fund management businesses with pedigree and track record will be allowed to establish funds. Read more »

Posted: February 10th, 2008 under Future Fund.
Comments: 6

This article covers the regulatory environment for managed futures funds in a selection of European offshore centers:

• Gibraltar;
• Isle of Man;
• Guernsey;
• Jersey.

GIBRALTAR

There are no specific regulations for futures funds in Gibraltar, but the Financial Services (Collective Investment Schemes) Regulations, 1991 apply to futures funds established in Gibraltar in addition to the Part III of the Financial Services Ordinance.

The regulator of the financial industry in Gibraltar is the Financial Services Commission (FSC) which may impose specific further requirements on particular funds under its discretionary powers. Read more »

Posted: February 10th, 2008 under Future Fund, Future Investing.
Comments: 6

Use of Derivatives by Investment Companies

As long as ICs comply with SEC regulations concerning asset coverage, there are no significant restrictions on their use of derivatives. However, an IC which uses derivatives more than just as a hedging strategy potentially faces the need to register with the CFTC as a CPO and may be required to comply with two different regulatory regimes.

Where an IC is registered with the SEC, its operator is not required to register with the CFTC as a CPO, if the IC enters into transactions in CFTC regulated derivatives for bona fide hedging purposes.

This exemption is dependent on the IC complying with the following conditions:

1. it commits no more than 5 per cent of its total net assets to initial margin and option premiums;

Read more »

Posted: February 9th, 2008 under Commodities Futures, Future Broker.
Comments: 5

THE UNITED STATES

The legislation for setting up and marketing managed futures funds in the US is incorporated in regulations from the Securities and Exchange Commission (the SEC), the Commodity Futures Trading Commission (the CFTC), and the securities (blue sky) laws of the 50 states.

Interests in funds are ‘securities‘ under the Securities Act of 1933 and may only be offered or sold to the US general public in compliance with SEC rules. In addition, the organisers and advisers of derivative funds are generally required to register with the CFTC as commodity pool operators (CEOs) or commodity trading advisers (CTAs).

Funds whose principal activity is investing in equities and government securities must in most cases register with the SEC as investment companies (ICs) under the Investment Company Act of 1940 and their advisers are required to register with the SEC as investment advisers (IAs) under the Investment Advisers Act of 1940. Read more »

Posted: February 9th, 2008 under Commodities Futures, Future Fund, Future Trading.
Comments: 3

Marketing Offshore Funds in Switzerland

Under the current law, a license to market shares in an offshore fund to the public in Switzerland can only be granted to a Swiss bank or a Swiss branch of a foreign bank, although not in respect of an offshore futures fund. Under the new law a license may be granted to any person, but only if an offshore futures fund is subject to home country control and its structure and investment policies are equivalent to those of Swiss funds.

Under the new law, offshore futures funds will be able to obtain a license to promote themselves in Switzerland whether they are contractual or corporate. They will be exempt from the requirement to redeem shares at any time.

A fund may avoid these requirements by marketing strictly on a private placement basis. In this case, no licences are required by the fund itself or the broking intermediary. However, a fairly restrictive stance on the number and type of investors that can be approached must be employed. The following criteria are applied: Read more »

Posted: February 8th, 2008 under Future Fund, Future Investing.
Comments: 5