The most recent three-month Treasury Bill auction netted 0%. Add fixed income, the safest place north of your mattress, to the list of investments that just aren’t giving any returns. As equities fluctuate back and forth in deeply negative territory and hedge funds one after the other produce huge drawdowns and halt redemptions, managed futures are the one investment/asset class that has provided positive returns for investors.
The most recent Barclay Hedge numbers show that every single hedge fund subindex, except for short sellers, is in negative territory for the year. Managed futures on the other hand is having one of its best years.
The Barclay CTA Index, including November’s preliminary returns, is up 12.39% year to date. If that holds through December, it would be the best year for the index since it returned 13.64% in 1995 and the second best year since 1990.
Despite this, Barclay Hedge President Sol Waksman reports seeing redemptions for managers in the index. “People are going to cash,” Waksman says. “The primary driver out there is a flight to quality and liquidity, look at T-bill rates.”
When the smoke clears, managed futures should benefit. Illustrating the type of year it has been for long equity based strategies, the 12-month return for Barclay’s equity short bias index is 50.58%.
CFTC gets busy
In the early part of December the Commodity Futures Trading Commission announced progress on numerous enforcement actions. The CFTC announced that it has obtained $12 million in restitution and civil monetary penalties against nine Florida defendants to settle CFTC vs. Liberty Mutual Group et al, an anti-fraud action in connection with the offer and sale of illegal off-exchange foreign currency options. U.S. Magistrate Judge Edwin G. Torres of the Southern District of Florida entered consent orders against Liberty Mutual Group, Inc., Addison Enterprise, Alan Lerner, Forefront Investment LP, Todd Guthrie and Benji Dayan, all of whom were charged with fraud.
The CFTC also announced a consent order of preliminary injunction by the U.S. District Court for the Southern District of Florida against Phoenix Diversified Investment Corporation Inc. and its former president and director Michael Meisner. The order is based on a CFTC complaint charging Meisner and Phoenix with fraud, misappropriation of funds and issuing false account statements.
The CFTC alleges that trading accounts of the commodity pool suffered $5.8 million in losses between May 2003 and March 2008 despite Meisner reporting profits to pool participants. Phoenix was not registered as a CPO despite being required to be.