IFAST INSIGHT - Superfund

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Information about IFAST INSIGHT - Superfund
Finance

Published on March 16, 2009

Author: clariekwa

Source: slideshare.net

industry insight By iFAST EDIT O R IA L T E A M A Different Asset Class: Managed Futures Funds Managed futures funds offered by Superfund Financial (Singapore) Pte Ltd are a relatively undiscovered asset class. M anaged futures are an asset class which is made up of professional money which traces its origins back to managers who are also known as Com- 1948. The managed futures in- modity Trading Advisors or CTAs. The dustry is made up of professional money money manager manages client assets on managers who are also known as Com- a discretionary basis using global futures modity Trading Advisors or CTAs, says markets as an investment medium. Aaron Smith, Managing Director of Su- All Superfund products utilise pro- perfund Financial Singapore. Superfund prietary, fully automated trading systems has 19 offices around the world and has which trade in over 100 broadly diversified been in Singapore since 2005. futures markets around the world. Instead “In the past year, we have grown and of a fund manager, we have a R&D team strengthened the team substantially and which programs mathematical formulas will continue to do so in 2009. Singapore into our trading system and everything is has great potential and through continu- done systematically, removing all human ous education, we believe investors will emotions. Every trade we enter, there is start to understand a new asset class they automatically a pre-calculated stop loss were previously not exposed to,” says Aar- which is adjusted on a daily basis. If a on. In Singapore, Superfund’s managed trade goes against us, we are stopped out futures funds are only available to inves- immediately. tors who meet certain net assets require- ments (for individuals with net assets of iFAST: What are the differences and simi- $2 million or income of $300,000 in the larities between managed future funds and preceding 12 months and corporates with hedge funds? net assets of $10 million). They are also AS: The only similarity would be both available to institutional investors and any managed futures funds and hedge funds person who invests more than $200,000 are classified as alternative investments. per transaction. But the underlying investments are very Aaron explains more about the features different. We trade only futures contracts of managed futures in this interview: which are listed and liquid. We can trade iFAST: Your expertise lies in managed future both long and short instead of one direc- funds. How do they work? tional bias. Managed futures are also high- Aaron Smith: Managed futures were ly regulated. From a correlation point of started in 1948 by Richard Donchian, view, managed futures are not correlated a year before hedge funds were created. to hedge funds so in effect they are two Managed futures describe an industry very different asset classes. 44 | February ~ July 2009 Article disclAimer: This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any fund. No investment decision should be taken without first viewing a fund’s prospectus. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. As some of the authors/contributors may have a personal interest in some of the funds commented on, investors should seek the advice of professional advisers regarding the evaluation of any product, unit trust or other financial instruments, report, index, opinion or any other content contained herein, to ensure the investment instrument is suitable for them. In the event that investors choose not to seek advice from a professional adviser, they should consider whether the investment instrument is suitable for them. Past performance and any forecast is not necessarily indicative of the future or likely performance of the fund. The value of units and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. iFAST Financial and/or its licensed financial advisers representatives may own or have positions in the funds of any of the asset management firms or fund houses mentioned or referred to in the article, or any unit trusts or Singapore Government Securities bonds related thereto, and may from time to time add or dispose of, or may be materially interested in any such unit trusts or Singapore Government Securities bonds.

iFAST: What are the pros and cons of will ship it all over the country. The city if you look at any paper currency to- managed futures funds? had few storage facilities, with little proce- day they are not pegged to any physi- AS: The pros are you will get a very diversi- dures or grading, leaving the farmers of- cal asset. In the past 4000 years, gold ten at the mercy of dealers. This is when has been the only currency and so was fied asset class that is uncorrelated (that is, the opening of a central place where the US dollar until 1971 when Nixon it does not trade in tandem) with your usual farmers and dealers could meet and deal took it off the gold peg. Since then traditional investments like equities and in “spot” grain, meaning exchange cash paper currency has lost much of its bonds so in a bear market it acts as a port- for immediate delivery. value. Due to the US economic crisis, folio protection. It is also an asset class that Hedgers use futures to protect them- the government will be forced to print performs in the bull market. The con would selves against adverse movements in their more money. This will erode the value be the natural volatility of 20% if you look underlying commodity. For example, a of the currency even more. Gold is the at it as a stand alone asset class but having food processing company which cans only currency that will hold its value said that, compared to the recent volatility corn. If corn prices go up, the com- and there is a limited supply of it. Man- suffered in the equities market, managed pany has to pay the farmer more. Thus aged futures funds that are valued in futures were less volatile. So incorporating to hedge against higher corn prices, the gold ounces like Superfund’s will pro- managed futures into a portfolio, the low company will buy corn futures to cover vide diversification instead of just hold- correlation will blend out the volatility. the amount of corn it expects to buy. ing physical gold. iFAST: What are the correlation numbers On the other side of the trade, if corn iFAST: The lack of transparency on hedge between managed future funds and global prices go down, the farmer will not be funds and how they are managed is a deter- equities and global bonds? able to sell his corn at the price he would rent to some investors. The recent Madoff AS: I’ve actually studied the period from like. To hedge the farmer will sell corn fu- case doesn’t do much good to the hedge fund tures (short) to cover the amount of corn January 1980 because that is the bull mar- industry too. Do you think managed futures he expects to sell. So you see it’s natural ket and many have the misconception man- funds will also be seen that way? If yes, to go short as well as long in the futures aged futures only do well during the bear what are you doing to circumvent it? market. market but that’s not true. It does well both AS: There are numerous operational, in bull and bear markets, it’s just during the iFAST: What are your views on the structural and regulatory differences be- bull market nobody wants to look at any- market? What asset classes and sectors are tween hedge funds and managed futures thing else except stocks. you most positive on this year and why? funds. First and foremost, managed fu- AS: We do not have a view per se as we tures funds are and have been regulated iFAST: What can investors and FAs expect use technical analysis. We believe all the around the world for many years and of- from Superfund in the next few years? information is already reflected into the fer meaningful transparency. This is why AS: Superfund is looking to grow our pres- price movements. However, we believe if education on what managed futures are the US continues to print more dollars, and how they work is so important for ence in Asia for the long run and we are then gold is a safe haven because it holds investors to make informed investment here to educate and offer an alternative in- its purchasing value. decisions and not to view managed fu- vestment solution to complement any port- tures in the same light. folio (subject to the investor’s risk profile). iFAST: What is your preferred allocation Managed futures are an asset class which between the different asset classes? Why? iFAST: Has 2008 changed the way you has previously been Wall Street’s best kept AS: We do not have a preferred allocation invest? secret as it was only available to the ultra AS: Not at all – 2008 has been a great like traditional fund managers. We look at high net-worth individuals and institutions. over 150 futures markets globally. When year for us. We have continued to We are here to educate FAs and investors there is a breakout in technical analysis, trade exactly how we have been doing why it is an asset class every investment we go either long or short. Traditionally, since the first Superfund product was portfolio should have. we are allocated to 50% in commodity launched in 1996. iFAST iFAST: Managed futures funds can adopt futures and 50% in financial futures but shorting strategies. Shorting is often seen as this is not fixed. risky. Is this the case? iFAST: You recently commented that gold AS: This is a common misconception. If may hit US$1,500 an ounce – will we see you look at any markets, they go up and this level this year? Why are you bullish? In iFAST INSIGHT’S DISCLAIMER: Please refer to the content and article they also come down. We are shorting fu- disclaimers on Page 6. in addition, Please note that restricted more practical terms, can you run us through tures and not stocks (for stocks you need authorised / recognised schemes may only be offered to certain how a managed futures fund takes advantage to borrow). It is common in futures to go tyPes of investors and to accredited investors whose total net of this view you have on gold prices? assets or annual income exceed certain amounts. this aPPlies to short. Just a bit of history, futures trad- all restricted authorised / recognised schemes, including hedge AS: There are a few reasons why we ing started in 1840s Chicago when farm- funds (whether single hedge funds, hedge fund-of-funds or are bullish on gold, but mainly because ers came to sell their wheat and dealers caPital Protected/guaranteed hedge funds). 45 Important: See Disclaimer on Page 6 iFAST INSIGHT | Article disclAimer: This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any fund. No investment decision should be taken without first viewing a fund’s prospectus. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. As some of the authors/contributors may have a personal interest in some of the funds commented on, investors should seek the advice of professional advisers regarding the evaluation of any product, unit trust or other financial instruments, report, index, opinion or any other content contained herein, to ensure the investment instrument is suitable for them. In the event that investors choose not to seek advice from a professional adviser, they should consider whether the investment instrument is suitable for them. Past performance and any forecast is not necessarily indicative of the future or likely performance of the fund. The value of units and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. iFAST Financial and/or its licensed financial advisers representatives may own or have positions in the funds of any of the asset management firms or fund houses mentioned or referred to in the article, or any unit trusts or Singapore Government Securities bonds related thereto, and may from time to time add or dispose of, or may be materially interested in any such unit trusts or Singapore Government Securities bonds.

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