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Tim Travis
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Tim Travis is a veteran deep value investor and money manager. Travis has extensive experience in traditional investments such as stocks and bonds, in addition to having a unique methodology of combining options and distressed investing with value investing to generate income, reduce risk, and... More
My company:
T&T Capital Management
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T&T Capital Management Blog
My book:
Learn to Treat Your Portfolio as a Business
  • In Unfamiliar Territory Managed Futures Article-Barrons 2 comments
    May 29, 2012 11:16 AM

    I think this is a rather naive Barron's article on Managed Futures. The Barclay's CTA index has much higher turnover than the S&P 500 so funds that have the worst performance are usually eliminated from it which greatly distorts the return numbers. This article also doesn't even mention fees which I'd bet are quite high as most managed futures funds are significantly more expensive than mutual funds. I've seen a lot of CTA's and the returns have been terrible. That doesn't mean that there aren't some good funds but I believe there are a lot of problems in the industry. These funds should be limited to accredited investors only as I've seen many retirees lose a large portion of their savings primarily to pay the fees of CTA's from unscrupulous commodities brokers.

    http://online.barrons.com/article/SB50001424053111903964304577418303932326824.html?mod=BOL_hps_mag

    Themes: managed futures
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  • James Rider
    , contributor
    Comments (4) | Send Message
     
    CTA fees should be like hedge funds i.e.. 2% admin and 20% performance and most often for institutional investors the admin fee is negotiated lower. Doing due diligence in the CTA space is not that difficult once you understand what the manager is trying to accomplish. There are two central questions, first, how well does the manager control the downside when market conditions are poor (can he keep his powder dry?), and, secondly, how well does the manager perform under ideal market conditions? This info should be easy to obtain with any manager with a audited track record back to 2007.
    29 May 2012, 12:29 PM Reply Like
  • ContrarianAndTrendFollower
    , contributor
    Comment (1) | Send Message
     
    and what about the companies turnover in the S&P? furthermore, CTA indices are net of fees, in contrast to equity indices. I don't take your argument with regard to CTA indices. Would be interesting if there's a survivorship study around. But as I can see, the "bad" elements remain much longer in a CTA or broad hedge fund index than in an equity index. But of course, as you say, one should be very cautious, then like in the investment business in general, also in the CTA space there are many "unscrupulous" actors, to use your word. Personally, I have been very happy with my substantial (i.e. approx. 20%) allocation to trend followers in my portfolio. But like any investment, there are good times and bad times and times where you should have a higher or lower exposure to a certain asset class.
    30 May 2012, 01:02 AM Reply Like
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