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Buy Side

CTAs Continue to Struggle in June Managed futures traders lost -0.98% in June, according to the Barclay CTA Index compiled by BarclayHedge. This was the largest monthly decline so far this year as the index is down -1.65% through the first two quarters of 2017. The BTOP50 Index, which tracks the 50 largest investable CTAs, also fell, registering a loss of -2.60% in June, and is down -4.77% for the year as well. “The first half of 2017 has been difficult for the CTA industry,” says Sol Waksman, founder and president of BarclayHedge. “The combination of low volatility and sharp trend reversals has helped to suppress returns for managed futures.”
AIMA Publishes MiFID II Best Execution Guide The Alternative Investment Management Association (AIMA) has published a guide for alternative investment managers to help them understand and implement the enhanced best execution obligations under the European Union’s updated Markets in Financial Instruments Directive (MiFID2), which will apply from January 2018. AIMA’s MiFID2 Best Execution Guide, which is only available to AIMA members, outlines the MiFID2 obligation to achieve the best possible results when executing transactions. These rules were originally introduced under MiFID1 and have now been enhanced in a number of areas.
Bigger Not Necessarily Better: AIMA Survey Dispels A new survey from the Alternative Investment Management Association (AIMA) and boutique prime broker GPP helps dispel the notion that bigger is always better regarding hedge funds’ asset under management (AUM). The survey of sub-$500 million firms finds that most are able to turn a profit and expand with considerably less than $100m in assets. The two bodies surveyed 135 alternative asset managers globally and found that the average break-even point is around $86 million in AUM, while around a third are able to break even with $50 million in assets or less.
New Study Highlights Buy Side Mifid II Concerns A new study by consultancy firm JWG shows that 90% of buy side firms believe they are at either high or medium risk of not being compliant with the Mifid II rules when they come into effect in January 2018. Among respondents to the survey, about one-third had less than £1 billion of assets under management (AUM), one-third had between £5 billion and £50 billion AUM and the remaining one-third had between £50 billion and £500 billion AUM. However, the level of preparedness was not found to be dependent on the size of the firm.
Is Active Currency Management Making a Comeback? A new report finds that institutional investors are taking a more active approach to managing portfolio-wide currency risks, and in particular there is a greater appetite for active currency overlays. The report, by investment analytics firm bfinance, says this change is being driven by divergence in European and US interest rates, geopolitical unrest and greater scrutiny of costs. The report also recommends investors look beyond the headline fees and look closer at transaction costs, stating, “Although front-end fees receive column inches, transaction costs have been the subject of serious reappraisal from investors and regulators alike. The days of prop trading scandals may have ended; the days of investors accessing more cost-efficient trading are only just beginning.”
Currency Headwinds Lighten But Unlikely to Remain So: Report The latest quarterly report from Fireapps shows that currency headwinds for those corporations that reported them fell to $6.7 billion in Q1 2017 – mainly thanks to North American firms reporting a $6.47 billion negative currency impact on earnings. This compares to a collective $16.88 billion hit in Q1 2016, the firm says. Fireapps analyses the earnings calls of 1200 publicly traded North American and European companies and says the companies included in the dataset are large multinational firms with at least 15% international revenues in at least two currencies.
Report: Liquidity, Funding Challenges Shifting Buy Side Behaviour Market and regulatory reforms are forcing buy side firms to look for new ways of accessing collateral, funding and liquidity, according to a new report from BNY Mellon and PWC. Based on a survey that 120 buy side respondents with a combined $12 trillion in AUM participated in, the report claims that “access to high-quality collateral, funding and liquidity is not only a pressing concern, but has emerged as the essential new performance driver for the buy side”. The current challenge with accessing these is twofold.
Survey: Asset Managers Uncertain About Mifid II Rules new rules, according to a survey by the Alternative Investment Management Association (AIMA). Fund managers globally that responded to the survey said that their biggest challenge regarding Mifid II is uncertainty about what the rules contained within the regulation actually mean – both their scope and substance – as well as what they perceived to be a lack of clarity relating to the cost and nature of services provided by brokers. The survey showed that 34% of alternative asset managers are undecided about how they will pay for research following the implementation of Mifid II. Of those that have made decisions around how to pay for research, 80% plan to charge investors and the remaining 20% intend to absorb the costs themselves.
O’Brien Launches Macro Fund O’Brien Investment Group has launched the OBIG Discretionary Global Macro Fund. The hedge fund will be managed by Monica Fuentes, Ph.D and will be open to public participation starting July 1 and available to sophisticated market participants such as accredited institutional investors and large family offices. The Fund will offer a Founders Share Class for the first $100 million of assets under management (AUM), available with a $250,000 minimum investment - a futures-only version of the strategy was launched last month.
Use of FX Algos on the Rise: Survey New research from Greenwich Associates shows that long-term investors corporate end-users are turning to algorithms in FX trading. The report, Long-Term Investors Embrace FX Algos, shows how an increased focus on best execution and the growing use of transaction cost analysis (TCA) are fuelling the adoption of algorithms in FX markets. Greenwich says that FX algorithms are used by more than a third of the biggest institutional or “real money” fund managers active in global FX markets, and by almost a quarter of the biggest corporate FX traders.