Bucky Isaacson is one of the early pioneers of managed futures. In 1969 he helped to develop one of the first computerized trading systems. From that point forward he has focused on the managed futures business, particularly in Asia, as well as becoming a prominent leader in the U.S. futures industry. He is a former member of the Board of Directors of the National Futures Association and currently serves on the Board of directors of the National Introducing Brokers Association. He is now Co-Manager of CTA Expo LLC and his office is located 30 miles south of San Francisco, in Woodside, California
John F. Gallwas:
To start please tell our readers the differences between "Managed Futures" and "Hedge Fund".
Managed Futures is a terminology that is predominantly used in the US. The term exists because managers that trade futures have to register with the National Futures Association. The term dates back to the mid 1970's when Congress formed the Commodity Futures Trading Commission. From that point on the Futures Industry was regulated by a different government body then the Securities Industry (Hedge Funds). In most other countries securities and futures are regulated by the same group. In those countries CTA's are considered a hedge fund strategy and are looked over by the securities regulators. There is no separate registration category for a CTA. Many of the leading hedge funds in the US started out as CTA's but morphed into hedge funds as they became successful and looked toward other than futures markets to trade.
BarclayHedge reports that the total CTA assets under management ("AUM") at the end of the 1st Q 2013 were $337.20B, up 71% in five years and 250% in ten. As you were one of the early pioneers in managed futures, what are the key reasons for this impressive growth?
At the end of the second quarter of 2009 there was $1.3T in hedge fund AUM and at the end of Q2 in 2013 there was $2.41T. That represents a growth of 85% during the same period that CTA assets increased 71%. While the CTA growth curb is impressive the numbers show that as an investment alternative CTA's are losing ground to other alternative classes. It reflects the fact that investors are not yet willing to give the same investment creditability to CTA's that other alternative classes are given. The CTA segment of the industry needs to do a better job of marketing itself and should consider starting its own association to help with that effort.
You and Frank Pusiteri saw a need to provide a environment where CTA's could market their respective programs to prospective investors, in a cost effective way. From the beginning, we have been proud to support CTA Expo LLC, which has now expanded from Chicago to New York, then London and Miami, with record setting turn-out at each location. CTA Expo will be in Chicago this year on Thursday 9/19/13. What is it about the growth of the CTA/Expo seminars that is different from its many seminar competitors?
When Frank and I started CTA EXPO we set 5 objectives that we wanted to achieve:
- Keep the price to attend reasonable so emerging CTA's and hedge funds could come without making a large dent in their marketing budget.
- Keep the events to 1 day so attendees did not have to take a significant amount of time away from the office.
- Speakers would discuss topics that would attract both managers and capital sources that look at emerging managers as a source of alpha.
- Allow plenty of networking time so managers and capital sources could meet.
- Make sure that all attendees enjoy themselves.
We feel the events are successful because we have been able to achieve the objectives. The benefit for Frank and I is that we had gone from pioneers to mentor to dinosaurs' and finally to fossils. We are now relevant again!
As you know, Striker works with both CTA's and System Developers. We have noticed that some CTA's are also System Developers by selling their trading signals to system traders in order to diversify their business. Moreover, because Striker reports actual trading results on its website, as well as on Striker's "White Label" network to other brokerage firms, they have additional exposure for both businesses. Is this a practice that other CTA's should consider?
CTA's should consider any avenue that will help them raise capital under management. Striker provides a much needed clearing house for traders that are looking to sell their signals as another source of revenue. The Striker Report is valuable to both traders and investors. Any channel that will give a CTA higher visibility in the investor community is a good thing.
Conversely, what factors should a System Developer consider if they would like to diversify by becoming a CTA?
They should consider the regulatory impact on their business of becoming registered but they should also be realistic about setting up a CTA business. They should put together a full business plan with attention paid to marketing, how much it cost and how much time it takes. I often tell managers there are a lot of good managers in our universe with a small AUM and there are a lot of mediocre managers with significant assets under management. The difference is marketing. You can have a great system but if you are not effective in letting people know about you won't get any investors
Is there anything in the "What's New" department that you can share with us now?
Frank and I continue to look for ways that we can improve the conferences. One of the things that we have done is help Horizon Cash Management organize a CTA Boot Camp for startup CTAs. It will be held on Sept. 18, the day before CTA EXPO, in Chicago. We are working on some new ideas for the upcoming conferences and as soon as we finalize them we will let you know.