There's no doubt investors are paying attention to the managed futures space, with 27 straight months of inflows according to Morningstar, even while the larger group of 'hedge funds' has seen tens of billions move out the door.
What's more, according to Preqin, 17% of those allocated to hedge funds plan to increase their exposure to discretionary CTAs in the rest of 2016, and 15% plan to increase investments in systematic CTAs. Now, it wasn't an overly kind late summer for many managers/programs as volatility was once again sucked out of markets (this time in record fashion with a longest-ever 50 straight days of no daily move larger than +/- 1% in the S&P 500). But volatility is kicking in again and investors are taking notice. Now is your time to shine.
This is your call to put on your marketing caps and strike, because the clients you onboard now (during a drawdown) will be the happiest of clients when volatility returns in a big way and the turn happens. We all know it will eventually happen; there's just that little question of when. When it does come, the performance chasers will come, and when it leaves, they will likely leave. But these clients you can get to invest now can become the stable core of clients we all look for, with their 'value' entry likely giving them a better chance at long-term success.
About that drawdown in managed futures: While you may be licking your wounds and living through a small drawdown - the simple thought exercise below can help you find the positive story in recent performance. We've seen almost a complete cycle of performance so far in 2016, with a nice rally for CTAs in January and February followed by some losses, followed by some sideways action, before some more losses.
The question now is -- what bucket do you fall into? We all might think down performance is a bad thing, but most investors are smart enough to benchmark performance - and three out of four scenarios for managers this year can be good stories. If you're one of the lucky ones to have out-performed on the way up AND on the way down, get that story out there - it is impressive.
But those are not the only people who should be talking. The "OK" buckets have a story to tell also, outperforming during either the run up, or the drawdown. How that happened and why are stories investors want to hear. Now is the time to benchmark yourself against the rest of the industry so far this year, and tell that story.
So what are you doing to get that story and your program in front of investors? They aren't going to magically find you on the web, call you up, and invest $5m, no questions asked. It just doesn't work like that. Are you enlisting cap intro firms, working with managed futures specialized brokerage firms such as RCM, engaging social media and digital marketing, or partnering with a mutual fund company for distribution? Are you embracing new marketing opportunities and the new ways to invest in the space, or fighting against them?
The decision to allocate is still largely based on the people and the process, but the only way to get to that stage is to have your program be seen. And that's where small and medium-sized managers are the ones with the most to gain from new changes and opportunities.
Managed futures mutual fund distribution runs deep, for example… are you keeping up? What's your game plan? More investors are considering alternative investment products than ever before. But unless you step up your game, all that money is going to go to the top 5% of the industry that's outspending the rest of the industry to make sure they're the ones in the Bloomberg articles, the ones headlining such and such conference, and the names everyone knows.
It isn't easy. You have to perform and be in the 'great' or either 'OK' box. You have to be willing to 'join them if you can't beat 'em' at times when it comes to the mutual fund space. And you have to be entrepreneurial and systematic in your efforts; finding unique ways to compete with these big budgets.
The time is now - go get 'em.