The ATM Syndrome
There were more than 1.5 million Automated Teller Machines worldwide
as of 2006, according to Wikipedia. Commodity trading advisors could
be added to that number. As highly liquid money managers, theyâve
been meeting investorsâ need for cash amid the credit contraction.
People are getting cash where they can while waiting for the hedge
funds that froze withdrawals to reopen the gates. As a result, certain
managed futures funds with extremely strong performance had big
redemptions that dwarfed capital inflows.
Whatâs going on with investors? I asked our editorial advisor Tim
Merryman, who not only talks with people in the know but looks at a lot
of data and is a CTA himself. Tim has a hypothesis.
In recent years pensions and other investors tried to diversify their
portfolios with long-only commodity allocations. But in the fourth
quarter of 2008, commodities went down together with other markets.
It happened in a few months, too fast for institutions to rethink the
concept of long-only commodities as a hedge, consider long/short
futures managers as an obvious alternative and change their allocations.
In the extreme turmoil, investors no longer looked for a hedge, just for
cash. Hence the ATM syndrome.
âMarkets went to hell in a hand basket so quickly that people did not
get around to hedging,â Tim says.
âAllocators donât like the idea of
catching a falling knife. Why hedge a position when you think itâs going
down further? People prefer to go to cash and wait it out.â
A rally in stocks could ease the strain on portfolios and change
investorsâ calculus. âSome allocators may feel slightly more comfortable
hedging with managed futures at this point,â says Tim.
Source :
http://www.opalesque.com/Future_Intelligence/OFI24Mar2009.pfd
There were more than 1.5 million Automated Teller Machines worldwide
as of 2006, according to Wikipedia. Commodity trading advisors could
be added to that number. As highly liquid money managers, theyâve
been meeting investorsâ need for cash amid the credit contraction.
People are getting cash where they can while waiting for the hedge
funds that froze withdrawals to reopen the gates. As a result, certain
managed futures funds with extremely strong performance had big
redemptions that dwarfed capital inflows.
Whatâs going on with investors? I asked our editorial advisor Tim
Merryman, who not only talks with people in the know but looks at a lot
of data and is a CTA himself. Tim has a hypothesis.
In recent years pensions and other investors tried to diversify their
portfolios with long-only commodity allocations. But in the fourth
quarter of 2008, commodities went down together with other markets.
It happened in a few months, too fast for institutions to rethink the
concept of long-only commodities as a hedge, consider long/short
futures managers as an obvious alternative and change their allocations.
In the extreme turmoil, investors no longer looked for a hedge, just for
cash. Hence the ATM syndrome.
âMarkets went to hell in a hand basket so quickly that people did not
get around to hedging,â Tim says.
âAllocators donât like the idea of
catching a falling knife. Why hedge a position when you think itâs going
down further? People prefer to go to cash and wait it out.â
A rally in stocks could ease the strain on portfolios and change
investorsâ calculus. âSome allocators may feel slightly more comfortable
hedging with managed futures at this point,â says Tim.
Source :
http://www.opalesque.com/Future_Intelligence/OFI24Mar2009.pfd