Top Traders of 2010

RAM Management Group LTD.
VACA Capital Management LLC
Fort LP
Hawksbill Capital Management

The question going into 2010 was, could managed futures match their strong performance of 2008 following a subpar 2009? The answer, in terms of performance, was unclear as most managers experienced a choppy first half of 2010 with the BarclayHedge CTA Index in negative territory.

There may have been a sense of lost opportunity as the sector performed poorly in 2009 and equity markets roared back from their March 2009 low. But it appears that investors’ memories are not as short as some believe, because the sectors saw a nearly 25% growth in assets in 2010.

Sol Waksman, president of BarclayHedge, says, "It was a good year and we saw a robust increase in assets under management."

The Barclay database showed assets under management grew from $213.6 billion at the end of 2009 to $266.8 billion by the end of 2010.

While 2010 ended up being a good year for CTAs — the Barclay CTA Index rose by 7.03% — it did not have the same benefit as in 2008 when equities and nearly all other alternative investment styles had horrendous returns.

"In spite of that, money was flowing in 2010. Why are they putting money into managed futures?" Waksman asks. "That is a trend we haven’t seen often. It is reflective of the growing realization that managed futures do make sense within the context of a diversified portfolio."

Word is growing beyond the typical institutional and high net-worth investors as innovative fund companies and managers are beginning to utilize the mutual fund structure to offer managed futures to a wider array of retail investors. While there may be regulatory hurdles to overcome, once retail investors get a taste of the diversification offered, it would be hard for it to be taken away and for this trend not to lead to greater allocations to the sector.

In terms of the year, a variety of managers did well. "We made money in most sectors. The biggest ones were metals, grains, interest rates and the currencies. All sectors were firing on all cylinders," says Jeff Earle, principal with Ram Management Group. "There were a lot of opportunities [whatever you traded]. The interest rate complex, the foreign currency complex, the grain complex and softs were very good."

Managers were able to take advantage of dislocations in interest rates and currencies because of the European debt crisis.

Hawksbill Capital Management Principal Tom Shanks (see Trader Profile) says their strong year was powered by moves in the interest rate complex. "In the early part of the year, we were able to take advantage of falling rates," Shanks says.

Strong moves in currencies and interest rates enabled larger managers, most of whom have greater allocations to the more liquid financial sectors, to perform well. The Barclay BTOP 50 Index returned 6.55%.

While strong moves in currencies and interest rates benefited the larger managers, big moves in smaller markets, like the grains and the softs in particular, provided opportunities for managers small enough to allocate significant capital to those markets. Cotton, sugar and cocoa had big moves and the grain complex had a major upswing in the second half of the year.

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About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board