Futures Stars: 12 for 2014

Rounding up the hottest new prospects in managed futures


The managed futures industry is traversing a rough patch as it enters the final quarter of 2013 with the prospect of a fourth year in five of negative returns looming.

Launch activity has been at its lowest level since 2007 and asset raising remains a challenge for smaller and emerging managers.

Even larger and established players are beginning to suffer investor redemptions. July was worst month in more then four years for net outflows, according to one data provider.

The managed futures space is dominated by trend-following style managers and for new managers it’s as difficult as ever to stand out from the crowd.

But despite recent performance headwinds, ever-rising barriers to entry and additional legal hurdles post 2008, new and exciting start-ups are there to be discovered, while existing mangers are launching new programs to diversify their offerings and to meet some changing investor demands.

In our inaugural Future Stars round-up we have scoured the managed futures universe to find a selection of the most promising new managers and program launches that have emerged in the past 12 months.

While not an exhaustive list, nor a ranking, we have sought to highlight the brightest prospects for 2014, canvasing expert opinion from funds of funds, seeders, FCMs and prime brokers, introducing brokers, administrators and investment consultants.

Some names maybe familiar, others have kept themselves below the radar quietly building a track record.

Given the short time period from which to assess past performance the final selection was compiled as much on qualitative as quantitative factors, with CTA Intelligence editorial judgment used to make the final call.

Fortuitously, our experts centred around many of the same suggestions for future success.

The majority are fully systematic and deploy a multi-strategy approach. Most trade on the shorter-term end of the spectrum. All are tipped to prosper. The countdown to 2014 starts here…

FOUNDER Steve Gross
HQ New York
New York-based AlphaParity was founded by Steve Gross, a former portfolio manager at Tudor Investment Corp, where he had a focus on global macro and derivatives alpha strategies.
Gross was previously a partner at Penso Capital Markets and a portfolio manager at Millennium Partners, beginning his career as a prop trader at the New York Mercantile Exchange.
He is joined at AlphaParity by fellow Tudor alumni Joshua Smith as head of quantitative research, and Ed McGraw as head of operations and business development.
McGraw was an investment manager at Man Global Strategies where he was responsible for seeding and strategic deals.
The pedigree and experience of the trio has excited CTA Intelligence sources.
Backed with his own money, Gross launched AlphaParity’s debut All Weather Fund in February, a quantitative global macro strategy that employs carry, momentum and value models depending on the market environment whilst remaining volatility neutral.
The program trades across the four the asset classes: equities, fixed income, FX and commodities through highly liquid exposures.
The strategy, which also has a Tail Opportunities Overlay, is understood to be running around $30m in assets.

FOUNDER Pascal Magnollay
HQ Stamford, CT
Managing partner and CIO Pascal Magnollay launched Amberstone last October after leaving DKR Fusion Management where he was president for 11 years.
As portfolio manager at Fusion from 2001 to 2012 he managed all of its systematic strategies, and oversaw a team of eight traders and quantitative researchers.
The physics PhD and veteran of the industry has been advising or managing the research and operation of systematic trading strategies since 1988.
He was a VP of AIG International Asset Management from 1999 to 2000, and a director of research and information technology at Mint Investment Management from 1988 to 1992.
Amberstone’s AGS employs ten trading systems implementing technical and quantitative momentum and mean reversion strategies across 100 liquid foreign exchange, commodities and financial markets, with an average holding period between three days and four months.
Around 60% of the AGS portfolio is dedicated to systems typically non-correlated with traditional medium and long-term trend-following strategies, including short-term trading systems and an FX yield model for major currencies.
Tipped for success in large part to his enviable industry track-record, although AGS was down 8.7% YTD through August.

FOUNDER Thomas Morrow
HQ Munich, Germany
Founded in late 2008 as a provider of alpha indices by former Winton Capital senior scientist Thomas Morrow, Aquantum operates businesses in Munich, Luxembourg, New York, and Oxford.
It launched its Aquantum Global Systematic CTA program in March, along with a Ucits fund version of the strategy.
It combines pattern recognition, mean reversion, trend-following and spread trading systems across a variety of time frames
and markets, and is designed to produce positive returns in both trending and non-trending market environments with “negligible” correlation to other CTAs and asset classes.
Morrow is joined by Moritz Seibert, most recently a managing director responsible for the Royal Bank of Scotland’s equity structuring business in the Americas, as the program’s portfolio managers.
Prior to RBS, Seibert worked in the quantitative research and structuring team at HVB/UniCredit in Munich. Before Winton, Morrow,
spent the majority of his career at Bankers Trust, and later Deutsche Bank following its acquisition.
Thought to have been seeded by two insurance companies, Aquantum was backed by CTA Intelligence interviewees for its strong institutional set-up, and is being closely monitored.
Aquantum expanded its managed futures offering with the launch of a commodity spread program in July.

FOUNDERS Mattias Eriksson/Anton Varnäs
HQ London, UK
Created by a team of BlueCrest Capital veterans, London-based C8 Investments is a systematic multi-strategy manager.
Launched with reportedly around $15m in principals capital, the team has kept a low profile to date, but was widely tipped by CTA Intelligence interviewees.
C8 Investments was founded by Mattias Eriksson, a former partner in systematic trading at BlueCrest, where he worked from 2003 to 2010, and Anton Varnäs, former CEO of Agaton Finance.
Patrick Finn, a former head of operations at BlueCrest between 2005 and 2010, was initially brought onboard as chief operating officer but is no longer part of the team.
Eriksson worked at BlueTrend, BlueCrest’s systematic trend-following division, led by Leda Braga.
The manager aims to generate attractive risk-adjusted returns through systematic models trading liquid equities, commodities, FX and debt instruments.
C8 has developed a high frequency model for equity index futures, a trend-following model to trade across a diverse range of futures, and an equity stat arb model for stock pair trading.
It launched its fund in September. The firm has its offices in the heart of London’s vibrant Soho district.

FOUNDERS Ewan Kirk/Erich Schlaikjer
HQ Cambridge, UK
Founded in 2006 by Ewan Kirk and Erich Schlaikjer, formerly of Goldman Sachs’ Quantitative Investment Strategies Group, Cantab enjoyed a meteoric rise to the top tier of CTAs managers before closing its original CCP Quant Fund to new investment in November last year at nearly $5bn in AuM.
The established UK-based manager launched its Core Macro fund in February, attracting headlines with its 0.5/10 fees.
Kirk hailed it as a “potential game changer” on launch and the fund raised $400m in just over a month.
Investor interest has remained healthy through the year, with the fund growing to nearly $700m by the end of July. Most of its inflows have been institutional money.
The new program has also outperformed the systematic global macro manager’s flagship
vehicle in recent months, which has suffered its worst ever losses, although Core Macro itself was down 6.9% YTD through August, according to BarclayHedge.
Core Macro targets a lower volatility than Cantab’s flagship quant fund and does not include some shorter-term models that would restrict its capacity for growth.
It could grow to $20bn, according to the Cambridge-based firm.

FOUNDER Robert J. O’Brien Jr
HQ Skokie, IL
Founded by Robert J O’Brien Jr in 2002, former president of Chicago FCM RJ O’Brien, County Cork is a stable of experienced traders, scholars, and technology specialists, currently offering six CTA programs.
A brace of new systematic program launches in February piqued strong interest from CTA Intelligence interviewees, who were divided on the better prospect.
County Cork’s Agricultural Long and Short Managed Futures Program has been in development by O’Brien Jr since 2007.
The systematic strategy, rare among agricultural programs, is based on the belief that cash market price movements are typically predictive of what happens in grain and livestock futures.
O’Brien Jr developed the theory into a systematic program which derives signals from the cash markets, although may use discretion to time the establishment of positions, particularly during highly volatile market conditions.
County Cork also launched two automated stock index programs, Equities I and Equities 2k, trading E-mini, S&P 500 and Mini Dow futures.
Trades are made daily and are exited the same day with no positions held overnight. County Cork added current COO Tom Senft in 2011 to handle operations and risk management, and former BdS Quant manager Mark de Souza as president in 2012, to develop the business, systems and trading.

FOUNDERS Rabin Kaneyson/Maziar Nikpour/Leigh Fitzgibbon
HQ Sydney, Australia
A new launch at the end of 2012 by Boronia alumni, the Degraves Global diversified program is 100% systematic, using trend, counter trend and pattern recognition with an intraday holding period.
The trading systems were developed by the principals through advanced statistical and mathematical analysis applied to over ten years of historical market data.
Trading risk is confined to a single trading day and no positions are held overnight, a feature which helped Degraves stand out for selection by CTA Intelligence interviewees. The program has returned 8.3% YTD through August.
Director Rabin Kaneyson was formerly head of trading and in-house counsel at Boronia Capital Management until he left in 2006 to help form CTA venture Cabana Capital Management with several Boronia colleagues.
Kaneyson left Cabana in June 2011 and joined an Australian family office hedge fund division before co-founding Degraves as head of ops and trading.
He is joined by Maziar Nikpour, a PhD in electrical engineering and former Boronia researcher, and Leigh Fitzgibbon, an expert in software engineering and algorithmic trading who holds a PhD degree in computer science.

HQ New York
A new CTA venture from Tim Lee, an industry veteran with a strong pedigree at leading managed futures firms.
The Glendorn founder and CIO was a former head of research at Vegasoul from 2010 to the end of 2013.
He was previously deputy CIO at Olympia Capital Management between 2006 and 2010, a Bear Stearns prop trader, head of research at Conquest Capital Group, and a PM at Graham Capital Management.
Lee started out as a portfolio manager at Niederhoffer Investments in 1988.
Glendorn applies a multi-model, short-term systematic futures strategy across 48 markets.
The strategies hold positions for less than a week in global stock index, commodity, fixed income and currency futures and forwards markets.

FOUNDERS Robert Pettit/Johannes Hoff
HQ London, UK
Set up by ex-Goldman Sachs bankers Rob Pettit and Johannes Hoff, John Street Capital aims to apply
scientific techniques to trade financial markets across asset classes and geographies.
CEO Pettit was at Goldman Sachs for ten years, where he focused on the development of systematic trading strategies, derivative pricing and risk management.
Hoff worked with Pettit on the derivatives trading desk at Goldman, and heads research and trading as John Street’s CIO.
Filip Wuytack, a former senior Winton Capital researcher and managing partner of Winton-spin out Henri Capital, which closed earlier this year, joined as COO/CTO to add further pedigree to the London-based manager.
The firm has kept a low profile to-date but has attracted something of a buzz in London and is strongly tipped for success by CTA Intelligence interviewees.
John Street’s program is a multi-strategy managed futures strategy that blends four different styles including short-term pattern recognition, regime identification, trend/momentum models and non-directional spread based models.

FOUNDERS Joakim Agerback/Tor Gudmundsen Sinclair
HQ Amsterdam, The Netherlands
Founded by Joakim Agerback and Tor Gudmundsen Sinclair, Romanesco has been trading with proprietary capital since 2005.
CEO Agerback has worked within managed futures since 2005 and in addition to developing his own systems has consulted for hedge funds and funds of funds.
He was previously a portfolio manager for Sweden-based IPM (Informed Portfolio Management).
Gudmundsen Sinclair, who is CIO, has worked for leading hedge funds, managed futures managers and funds of funds in a range of roles.
Romanseco won a seeding deal with Dutch seeder IMQ at the end of 2012.
Identified as a strong prospect, Australian hedge fund seeder Scout Global Funds joined IMQ as co-seed in March and Romanesco’s Persistance program was launched to external investors via managed accounts on the dbSelect platform.
Persistence employs multiple short-term trading systems in a diversified portfolio of liquid futures markets aiming to exploit repetitive patterns of short-term price movements.
Trades are held on average for two days. Trading and execution is fully systematic and automated.
The program, which has $63m in AuM, seeks to have a low correlation to other hedge funds and CTAs, and was up 5.1% YTD through August.

FOUNDER David Hathaway/Jonathan Farrin
HQ Atlantic Beach, FL
A discretionary macro/systematic trend-following CTA from David Hathaway, a former director of systematic trading and head of institutional interest rate derivative sales at Wells Fargo Bank, and Jonathan Farrin, an ex-global macro portfolio manager at SAC Capital Advisors.
Farrin is also a Wells Fargo alumni, trading interest rate swaps from 1999-2010, and latterly managed the business. The fusion of systematic quantitative strategies and discretionary trading methods with the pedigree of the two principals won the new manager tips from CTA Intelligence sources.
The program has a flexible macro portfolio that trades futures exchanges across the globe and is blended with largely systematic trend-following models, although mean reversion, cyclical, and algorithmic models are also employed.
An independent, discretionary strategy is also run, often with a short-term time horizon, and contrary to the trend. The principals believe combining two independent approaches into one comprehensive strategy will result in a smoother return profile. A YTD return of 26.5% through August puts Sandpiper among the top performing CTAs this year.

FOUNDER Lawrence Rascio/Mark Shukovsky
HQ New York
New York-based STRM recently launched its maiden quantitative/systematic managed futures strategy to outside investors after a March internal debut.
Principal and co-founder Lawrence Rascio designed its programs to exploit structural inefficiencies brought about by the still to be determined impacts of central bank policies, global political wrangling, and general macroeconomic uncertainty.
STRM’s portfolio is 50% invested in G7 interest rate futures; 25% G7 currency futures; 10% commodity futures; and 15% US equity futures.
The STRM Capital Master Fund has a $500m-$1bn capacity.
Prior to co-founding STRM Capital Management, Rascio was a senior trader and portfolio manager at NineAlpha Capital and a former head of interest rate derivatives trading at MF Global from 2008 to 2009.
Fellow portfolio manager and co-founder Mark Shukovsky was formerly a portfolio manager and global macro trader at Rosenthal Collins Group between 2010 and 2012, and a founding partner and PM for MSVR Capital Management, a global
macro hedge fund, from 2007 until 2009.
Both were previously at Bear Stearns. Up 13.6% YTD through August, STRM, an acronym for Systematic Trading & Research Methods, was widely cited as a good prospect by CTA Intelligence sources.