by Tyler Resch, Portfolio Manager, IASG
Posted December 18th, 2012
As the temperature outside rapidly drops along with the volume in the market it is starting to dawn that 2012 truly is drawing to a close. We entered the year on the heels of record volatility, the largest bankruptcy the futures industry had ever seen, and global uncertainty without a conclusion in sight. In similar fashion we exit 2012 focused on the “fiscal cliff” with a familiar ambivalence. December is quickly slipping away and it seems unlikely that President Obama and US House Speaker Jon Boehner will reach a compromise by Christmas. This is however the season for miracles so we shall see.
I for one welcome the volatility the New Year is certain to bring. I believe it is easier to trade the news then it is to trade the market we have experienced over the last year. Although we are 200 points higher in the S&P now then when we started in January, every time it seemed to be a clear buying opportunity the market would aggressively sell off leaving you to wonder if you had missed your chance. Then the cycle would repeat. Other markets had different problems but in general it was a pretty tough year for the asset class.
With some of the more negative aspects touched on, let’s identify the positive. In a year where some struggled, there were plenty that shone. Years like this help you truly assess correlations and how to apply the study to your own portfolio or potential allocations. There are certain years that forever help you identify the outliers. I believe we just experienced such a year and for that I am grateful. In especially conducive markets it can be difficult to identify just how diversified you are and how well you are prepared for the schizophrenic type market 2012 turned out to be.
Another positive albeit overdue outcome is the effort from the futures regulatory bodies to help restore confidence regarding the protection of our funds. Transparency has increased, more stringent reporting requirements have been enacted, and both the NFA and CFTC are being more proactive in identifying ways to further safeguard funds. Managed Futures as an asset class has continued to grow in 2012 as investors look for alternatives that are liquid, transparent, and offered in a regulated investment vehicle.
I do believe that 2013 will hold many more positives and without doubt will also have many hurdles. This continues to be an exciting time for the alternatives space and I am looking forward to the year ahead. Please feel free to call or email me to discuss some of these possible struggles and explore some strategies to employ. I hope you all have a joyous holiday season and a happy New Year.