Category: Managed Futures Education

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Managed Futures Education Resources

Definitions and Formulas

Arbitrage: Several sub-strategies fall under arbitrage. The most prevalent in the managed futures industry is statistical arbitrage. A simple example is simultaneously buying gold on one exchange (for a lower price) and selling gold on another exchange (for a higher price). This strategy looks to profit from the price difference. Average Commission: This represents the […]

Managed Futures Education Volatility

Risk Parity and Volatility Targeting as a Danger – Let’s Get Real with Some Numbers

There is growing talk that volatility targeting and risk parity are the dangerous new “portfolio insurance” strategy of the decade. In the post-’87 crash period, the view was that portfolio insurance sowed the seeds of market destruction by creating a market decline feedback loop. As an option replication strategy, portfolio insurance automatically increases risk exposure […]

Managed Futures Education

Scenario Analysis – Because There is More Than One Path to the Future

Investors do not know the impact of different alternatives in history. In fact, history is subject to discovery and this process of historical discovery is subject to biases as we try to sift through facts.

Managed Futures Education

CTAs Set to Thrive at End of QE Era

In the midst of any foggy economic phenomenon, it’s difficult for an industry to really assess how it’s being affected. But with time comes clarity, and it’s now possible to look back on the past eight years of Fed policy and draw broad conclusions about how Quantitative Easing actions created headwinds for investors in the managed futures space. Crucially, these conclusions give us a reason to feel optimistic looking toward 2017 and the return to a world of abundant, varied trading opportunities.

CTA Managed Futures Education

The Failures of Central Banking

We have been meaning to write an in depth report on central bank policies for some time and the market responses to recent BoJ policy decisions as well as the Fed meeting and press conference this week have nudged us to make a start. Below are some initial thoughts on how good central banks are in their forecasts and where they may take us in the future. We don’t mean this to be a rant, but it’s hard to discuss central banking politely when they have been so ineffective, when they refuse to accept they have been incorrect and they refuse to fully acknowledge the full unintended consequences of their hugely experimental policies.

Managed Futures Education

Another European Summer of Discontent

The most obvious and immediate European problem is the UK’s Brexit vote on 23rd June, and momentum has clearly swung away from the remain camp in the last two weeks. What was seen as only a minor risk for financial markets has quickly become a huge potential risk and prices have begun to adjust. In our opinion, this is not just an issue of migration but a problem of the average man on the street simply does not feel that their lives have improved materially since the Global Financial Crisis. There are a huge number of voters who feel completely disaffected and simply want change. This is not an issue unique to the UK. Huge numbers across Europe and the US are in the same boat and the risk of a series of anti-establishment votes in the next year or so is growing.

Managed Futures Education

Life Just Became a Lot More Difficult for the Data Dependent Fed

After a truly disappointing US employment report, the market has priced out any rate hike in coming months, with only slightly more than a 50% probability of one rate rise by year end. In our opinion, Janet Yellen has always been a lot more dovish than a number of her colleagues and will not want to raise rates now. So, either the Fed ignores the poor US employment report (and the continuing weakness in the manufacturing sector and corporate profitability) and raise rates anyway, thereby risking upsetting the financial markets. Or, they shift back to a more dovish narrative, risking their credibility.

Managed Futures Education

When Interest Rates Rise From Zero

The general rule of thumb in equity investing is that you do not Fight the Fed, and there is a lot to be said for that thesis. Naturally, one has to respect the idea that higher rates provide more competition for equities in the traditional equity/bond portfolio, and vice versa when rates are low. I have actually spent, who knows how many, hours trying to model equities vs interest rates and I learned several lessons in the process. Primarily that rates high and rising are indeed not conducive to higher equity prices. However, rates low and rising are not as reliably equity unfriendly. And one can make a case that rates Low and rising are initially actually very good for equities. My studies suggested a high correlation between equities and rates when rates were high, not as much when rates were low.

Managed Futures Education

Markets Have to Adjust as Fed Alters Course

The Fed’s normalisation process has been a tortuous on/off affair primarily because their focus has been almost entirely on not upsetting the financial markets rather than doing the right thing for the long term health of the US economy. This week, the Federal Reserve machine cranked into action to persuade markets that they want to raise rates before the Summer and again before year end. So far, the reaction has been quite muted, but it is far from certain that this calm veneer will continue. Let’s dive in and think about what the Fed are doing and what this means for markets.

Managed Futures Education


拓展海外资产投资,深入了解大宗商品基金策略与投资 时间: 2016年8月20号-至29号 地点:芝加哥 主办单位: Institutional Advisory Services Group, USA

Managed Futures Education

Investors in Search of Instant Gratification But Patience Needed

As most of us know, trying to predict financial markets is frustrating nearly all of the time, and downright impossible too much of the time. Part of the problem is that everyone wants instant gratification. As money managers, we are delighted when our trades become immediately profitable and frustrated when they don’t. The same goes for all market participants regardless of individual timeframes.

Managed Futures Education

Bracketology – An Investing Lesson from the NCAA

“Bracketology”, a term coined by ESPN, is the study of the annual NCAA college basketball tournament. Interestingly the art or science of filling out an NCAA tournament bracket also provides insight into how investors select investment assets. Before explaining, we present you with a question: When filling out an NCAA bracket do you A) start by picking the expected national champion and work backward or B) analyze each matchup, and pick winners starting at the earliest rounds, working toward the championship game?

Managed Futures Education

Paradigm Shift

The Absolute Return (AR) series of articles provides a primer on alternative investment styles to which few investors have access. Global markets and economies appear to be at the precipice of a paradigm shift making the timing of the AR series of unique value. In the 7 years since the financial crisis, most asset prices have experienced significant appreciation allowing for even the most inexperienced investor to increase his or her wealth. As the saying goes, “a rising tide lifts all boats”. For investors, understanding the tide of financial momentum is extremely important. Accordingly, we summarize 4 primary drivers of past returns to help gauge whether the tide can continue to rise or if retreat is more likely.

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