The Commodity Futures Trading Commission (CFTC) in January charged Renaissance Asset management, a Roswell, Georgia-based CTA and commodity pool operator, and its chief operation officer Anthony Ramunno with commodity pool fraud.
One week prior, the National Futures Association (NFA) executed an emergency audit of the fund based on investor suspicions. Ramunno provided NFA staff copies of what he claimed to be audited reports of the pool’s performance in 2004 and 2005 prepared by Grant Thornton LLP. However, the auditor has never performed any services for the pool, according to the complaint.
A potential investor who was contacted by the global macro manager says the performance appeared to be too good to be true. “What I learned is that if someone shows me audited financials, pick up the phone and call the auditor to make sure they did it,” says the investor.
Don’t blame hedge funds
After more than three years of hearing energy market analysts blame hedge funds for the rise in energy prices, particularly crude oil, it was not much of a surprise when all of a sudden fund activity was being blamed for the precipitous drop in crude oil, which began in the second half of 2006.
But a recent report by the CFTC indicates that the price relationships within the WTI crude oil complex are greatly improved, thanks in large part to swap dealers and hedge funds. The report “Market Growth, Trader Participation and Pricing in Energy Futures Markets,” details how the activity
of swap dealers, hedge funds and other market participants have increased the liquidity of farther out crude oil contracts and how that added liquidity has increased the correlation in prices of nearby and distant delivery months improving hedging opportunities and the overall price discovery process.
Michael S. Haigh, associate chief economist at the CFTC, says that while the study did not center on price or the effect of hedge funds on the crude oil market, its conclusion discourages the notion that hedge funds and index funds distort the price of crude oil.
The bottom line the report
communicates is that there is greater liquidity in farther out crude oil months thanks to better market-making by numerous sources, particularly swap dealers.
Energy fund manager Craig Wilkinson says if he asked for a quote in a crude oil contract three years out five years ago, the bid/ask spread would be 50¢ and he would have needed to go over-the-counter. Today that spread would be half that available on an exchange.
Breaking up news
When baseball teams have losing records in back-to-back years, usually the blame is put on the manager and coaches. That apparently is what happened at John W. Henry and Co., the firm whose founder also is an owner of the Boston Red Sox, as some employees, including Mark Rzepczynski, president and chief investment officer, left JWH after another tough year — one fund down almost 20% — for the long trend following CTA. See futuresmag.com for updated information.
