From the May 2013 issue of Futures Magazine • Subscribe!

CTAs speak out: “We’ve been wronged!”

Bankruptcies happen in the markets, it’s a fact of capitalism. In the futures industry, there’s been a long and winding road to ruin by the likes of Volume Investors, Stotler, Griffin Trading, Drexel, Refco, Sentinel and Lehman Brothers. Although each of those events had glitches, nothing seemed to match the short- and long-term destruction of the MF Global, and to a smaller extent, PFG, bankruptcies. These bankruptcies, to paraphrase Tolstoy, were unhappy in different ways.

Having clients who were affected by these debacles, and hearing the frustration from the industry, Diane Mix Birnberg, founder and chairman of Horizon Cash Management in Chicago, decided to get a better measurement of the impact on the managed funds industry. Using the list of NFA-registered commodity trading advisors (CTA) and commodity pool operators (CPO), Horizon sent a survey asking 35 questions from how specifically these firms were impacted to what recommended solutions did they want to see put in place going forward. The findings were interesting.

“We didn’t see that anyone had spent time listening to this group,” Birnberg says. “So we asked these traders, if and how they were involved, to what extent they were hurt and how they were still affected.”

Although distributed globally, 85% of the responses were from U.S.-based CTAs and CPOs, which gave the survey about a 15% response rate.

63% of the respondents had been in business less than 10 years while 37% had been in business more than 10 years.

Most responding CTAs and pool operators were “newer” to the industry. Assets under management bolstered this, with 54% of respondents managing under $5 million, 30% between $5 million and $100 million, and 16% managing from $100 million to $5 billion. Birnberg wasn’t surprised by this skewed response because younger CTAs typically are the ones who don’t have a voice and saw this as a way to speak out, she says.

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