Did you know that there are CTA's who not only started as system developers, but also double as systems developers in order to beta test systems and to provide additional income?
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 the National Introducing Brokers Association. He is now Co-Manager, with Frank Pusateri , of CTA Expo LLC and Bucky's office is located 30 miles south of San Francisco, in Woodside, California.
John F. Gallwas:
System Developers' sell or lease trading systems to other traders, whereas CTAs' on a fee basis, manage investors' money. Explain the opportunity for a System Developer to become a CTA and also how a CTA may also be a System Developer.
I know of system developers that, after they gain a following and establish a system track record, decide to become CTA . Then, as a CTA, they found that many of their systems customers became investors. Starting as a system developer is much less expensive, the compliance issues less demanding, and the lease income allows for more time to develop trading strategies.
There are also successful CTA's that use a system developer program to beta test a new system and receive income, before using the new system to manage funds.
Frank and I feel the Striker Report provides a valuable service to all system developers and their clients, by since 1989 acting as an informational clearing house and publishing actual trading results.
As a pioneer in "Managed Futures" you and Frank Pusateri , saw an industry problem which you helped to solve. What was that need and how did it lead you to establish CTA/Expo in 2008?
The managed futures industry is comprised of a group of extremely talented individuals who have developed effective trading strategies. Frank and I observed that many of these managers were so focused on developing their strategies that they ignored the marketing aspects of building a business. A recent survey of CTA's concluded that:
- 61.0% have no marketing plan
- 76.4% tap out their network of potential investors in one year
- 89.0% fail to reach $100M assets under management ("AUM"), a threshold required by many institutional investors.
On the other hand we noted that many investors were frustrated in trying to find emerging
CTA's. As a result, we believed the industry need a forum where emerging managers could network with prospective investors in a cost effective way. We also felt the forum should also feature presentations on topics that would be of interest to all parties. CTA Expo was launched in 2008.
Why has CTA/Expo been such a great success?
Frank and I were among the founding members of the National
Association of Futures Trading Advisors ("NAFTA") in 1981, which eventually evolved
Into the Managed Funds Association ("MFA"). By 1986 NAFT had grown to 124 members with total assets under management of $800M. At the end of the 2013, Barclay Hedge reported AUM of $331.2B, but even with this spectacular growth, the emerging manager was still facing the same problems. CTA Expo helps to solve these problems because:
- The cost to attend is reasonable
- About half of the attendees are a variety of capital sources
- General session topics are relevant to all attendees.
- Time efficient one day conference
- Managers can present in boardroom setting
- There is significant time for networking.
The attendance at each of our conferences keeps growing and we have had a series of conferences that were sold out with people on the waiting list.
Describe the profile of an emerging CTA?
The capital sources that attend CTA Expo include institutions, fund of funds, family offices, and brokerage firms. The problem is that each has its own profile of an emerging manager. Although there is no industry standard the benchmarks usually include:
- A minimum AUN
- Length of performance record
- Starting a new strategy
- Institutional participation.
- U.S. capital participation.
What are the potential pitfalls the emerging CTA may face?
I get calls on a regular basis from CTA's asking what they are doing wrong or why they can't raise capital. It reminds me of the movie "Groundhog Day" getting the same questions over and over again. It raises the issue as to why there are managers with mediocre performance with significant AUM and others with great performance still struggling to raise funds?
The difference is in how you and your company present to capital sources. You need to develop your own marketing plan for presentation as well as a "brand" to differentiate your company from other CTA's in your pier group.
The first thing a new manager should do is to develop a marketing plan. The two key elements are (1) how much money can be allocated for marketing and (2) how much time can the manager afford to be on the road prospecting? Other elements include the development of infrastructure for investors, website, social media, and conferences like CTA Expo. For branding, Linda Citroen's book "Creating Power by Personal Branding" is an excellent read for any manager.
We note that there is a "workshop" scheduled the day before CTA/Expo in New York on 4/30/14. What's this all about and who should consider attending?
The workshop is captioned "The Rules of the Game – Business Guidelines for Emerging Managers" and the objective of the half-day session is to brief new managers on the functions needed to start a CTA business. Subjects covered will include both operational and marketing functions with sources of information and help, if needed. We believe the program will answer most of the commonly asked questions and definitely worth the time of any new manager.
Other than the workshop before CTA/Expo, is there anything in the "What's New" department that you can share with us now?
We are constantly looking for ways to make the conference more useful to attendees. For example, we have introduced an application on our CTA Expo website where the registrant can open a personal APP, receive a password and be able to post their CTA profile on our website. The APP can also be used to book meetings and network with others at the conference.
In addition, for the first time we will have a panel discussion at the luncheon session. This panel will feature three prominent authors who have written books on the managed futures industry.
Please note there are several new interviews and articles posted on ctaexpo.com that cover the current state of the industry as well as how to market yourself as an emerging manager.
This year's New York CTA Expo is at the New York Stock Exchange in the Members
dining room. Attendees will enjoy and insider's view of this historic building.