The Managed Funds Association (MFA) conference in Key Biscayne Fl. (held Feb. 8-10) was a tale of two asset classes. Much of the discussion surrounded the financial crisis, poor performance and expected additional regulation.
But the strategy/asset class best represented at the conference in terms of actual managers in attendance was managed futures, and commodity trading advisors (CTAs) had a great year in 2008. There was some confusion when a sponsor from a CTA introducing a panel, talked about how outstanding a year it was for the industry. There were some quizzical looks around the room from those who worked at or serviced the larger universe of equity based hedge funds. See it wasn’t so good of a year for them.
Hence the dilemma. MFA, once the Managed Futures Association now the Managed Funds Association, represents the larger universe and many CTAs feel left out. While this could be caused by their lack of participation, the larger question is how does MFA represent CTAs when their greatest argument to potential investors is that they are a better alternative than hedge funds, which are also represented by MFA.
Futures have always been looked on with suspicion. Jim Rogers calls it the “brother-in-law syndrome. Everyone knows someone who took a bath in futures because they were overleveraged.
But it is no accident that managed futures is thought of as much more risky than a long-only equity strategy and inappropriate for retail investors. The mutual fund industry is larger and has helped to maintain some of these biases. And for some reason, hedge funds, in many circles, have been legitimized while CTAs are still looked on with suspicion.
As the MFA has tried to maintain the exemptions to registration for hedge funds pointing out that they are only offered to institutions, it made their task of trying to reform the extreme regulatory burden on public commodity pools difficult.
But now they are resigned to the fate that regulation is coming and perhaps they can work on the illogical inconsistencies in the regulatory structure.
Tags: CTAs, Managed Futures, MFA, regulation
