Industry Highlights

The whole area of alternative investments is a major talking point in both academia and the industry these days. Not that this is something new, of course. There has always been some kind of alternative investing going on. For many years it was the commodity market which was the main focus, often through Commodity Trading Advisors (CTAs) – though that is rather a catch-all category for what today would just as likely be considered hedge funds as in many cases similar trading strategies are employed. Today alternative investing has expanded to include a great many different areas of investing, to include the currency market, and commodities have remained a focal point thanks to the growth of ETFs.

The fun part of being a PhD student is that you pick up all kinds of interesting information through your research, attending conferences, and sitting in on seminars. This week I’ve been in a workshop put on by a visiting faculty member, part of which focused on alternative investing, with a specific concentration on commodities. Naturally, he told us all about various research into the subject matter, and included a significant bit of his own.

Here’s the unexpected conclusion he presented to us. Despite the fact that commodities have been hyped for years as providing diversification for investors who otherwise play stocks and bonds, the evidence doesn’t support the case – at least when looking at them in aggregate (as we would with a commodity index or ETF). This is especially understandable in recent times given how commodities have become much more correlated with stocks and bonds of late, at least partly thanks to the increased use of commodities in asset allocation (decisions which drive the choice to invest in financial assets correspond to those to invest in hard assets).

The one exception to this discovery is gold. The research supports the idea that diversification into gold is actually worthwhile. No doubt there are many gold bugs out there saying that was obvious all the time.

By the way, one of the major selling points in investing in commodities is the rates of return of commodity indices like the GSCI. These indices, however, have a built-in upside bias based on the way they are constructed. In other words, they don’t really tell the full story about what commodities are doing, but they are great for selling a good story to drive investment.

So, if the commodity market isn’t so great for alternative investment, is it time to look for an alternative alternative?

A Porter Cluster is not just a bunch of beers, it's when in industry or a kind of business gains traction in a particular place and seemingly competitive businesses thrive side-by-side due to the concentration of talent, investment capital, customers, and just the sheer entrepreneurial buzz of all that innovation in one place.  It's pretty exciting, and even more exciting, the Boston Business Journal just declared a cluster for alternative investing right here in Boston, and Currensee is right in the middle of it.

In the February 22-28 edition of the Boston Business Journal, Kyle Alspach writes,

A number of Boston-based tech startups are working to provide easier access to two niche areas of investing — foreign-exchange trading and quantitative stock trading — that have gained a higher profile in recent years.

The startups say they are capitalizing on interest from investors who’d like to reap more benefits from those alternative investments, but may not want to devote their lives to becoming experts themselves.

Alspach interviewed our own CEO Dave Lemont, and also checked in with Quantopian, a quantitative trading startup, and BuysideFX, a currency management system.  As the article says, investors are looking for viable alternatives and ways to invest smarter and more efficiently. Here's to more investing innovation in Boston!

UPDATE: Just as I finished writing this, we're in another BBJ article that includes nine financial startups in Boston!

 

In terms of making an investment that’s not in sync with the stock market while still battling market volatility, managed futures are looking like one of the diversified investor’s weapons of choice. Their biggest strengths come from an ability to thrive in all sorts of market conditions, divergence from the performance of more traditional investments, and the management of Commodity Trade Advisor’s whose strategies hedge risk.

As equities continuously suffer the wrath of unfortunate global economic health, we find ourselves in the optimum environment for alternative investing. Alan Reid, CEO of investment advisory firm Forward, says it best (and simplest) with, “managed futures strategies have a record of zigging when equity markets zag”. And he has the data to back it up.

A recent report produced by Forward plainly demonstrates managed futures immense lack of correlation by looking at the performance of the Barclay’s CTA, an index measuring the performance of Commodity Trading Advisors (managed futures specialists). During the first few years of the new millennium while the dot-com bust wrought devastation upon the stock markets, the Barclay CTA continued to deliver positive returns.

 

 

According to Forward’s report, over a 32-year period ending December 31, 2011, the CTA Index gained 5.21 percent annually, while the S&P 500 saw average gains of only 0.31 percent. During the last two major financial crises, the gains of the CTA Index remained in the double-digits, while those of the S&P hit negatives. How’s that for all weather investment?

Now more than ever, with global economic growth in question and strong market volatility threatening confidence in stocks, investors should be focusing on playing defense. And what better way to do that than with an alternative investment that’s past performance has demonstrated it clearly zigging when the equities markets zag?

 

 

 

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

The prospect of having an investment industry genius strategically (and often aggressively) managing your asset allocations in an attempt to kill risk and crank out returns can be alluring. Add to that the current upsets throughout the global economy, and despite their stigmatic volatility, hedge funds are looking pretty tempting.

Unfortunately for many retail investors, the restrictions that determine who can access a hedge fund don't leave much in terms of acceptance. In order to invest in these managed funds, one must either be an accredited investor with $1 million plus in liquid assets and a $200,000+/year paycheck, or a qualified purchaser, who owns at least $5 million in investments already. This clearly narrows the investor diversity scope down a bit.

But, the shell of the hedge fund industry looks like it’s finally starting to crack. Recent findings of financial research firm Cerfulli Associates published in an InvestmentNews article last week demonstrated that money managers expect their allocations into alternative investments to increase by at least 50% over the next three years. Investors and financial advisors also have a growing desire to increase alternative investments to negate market downturns and create a divergence from the stock and bond market.

But what does this have to do with making the elusive world of hedge funds more mainstream? It seems the ripples caused by an overall increase in demand for alternative investments have reached the mutual fund industry in the form of something known as ‘alternative mutual funds’.

Funds of this sort fall into alternative sectors such as long-short equity (one of the more popular), currencies, precious metals, and commodities. Taking it to the next level, alternative mutual funds twisted and evolved a bit further into something very similar, known as hedge-like mutual funds (the two names are often even interchanged.) These funds have the potential to hedge risk and generate stronger returns using some of the same strategies and tools that hedge fund managers use.

The most attractive characteristic of investing in a hedge-like mutual fund is that now, average-income investors can access the advantages of hedge fund investing previously available only to those qualified to invest in a hedge fund. Because the SEC regulates them, hedge-like mutual funds preserve some amount of the conservatism and transparency that is demonstrated within traditional mutual funds. Unfortunately, this can also impact these funds negatively in that it restricts their flexibility and requires a greater level of liquidity.

Though these crossbreed mutual funds aren’t anything new and earth shattering, Cerulli predicts that within the next five years, their presence will increase to the point of comprising 10 percent of mutual fund assets - a 245+ percent surge. The fueling of their growth really comes down to one thing: education. Money managers who strive to educate financial advisers on their investment products are the ones seeing positive results. This is due simply to the fact that many advisers are not yet familiar with all of their options in alternatives available to them. And we all know how easy it is to fear the unknown.

The theme of taking an investment that was once unavailable to traditional investors and making it available to them is common across the alternative investing landscape. Hedge-like mutual funds have successfully done what Currensee is striving to accomplish by carrying out this theme. Just the way hedge fund management, tools, and strategies were only available to high net-worth investors at one time, not long ago the world currency market experienced the same inaccessibility. However, with the emergence of various types of trade replication software and autotrading, even those with no prior knowledge of currency trading can allocate a portion of their investments to this type of alternative.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Despite yesterday’s surge in investor confidence that provided Asian markets a boost, things appeared to have fallen a bit flat this morning. As reality set in that Spain’s bond yields have hit record-breaking highs and Greece’s electoral success might not be enough to negate prior monetary upset, investor’s optimism wasted no time in fizzling out.

Bloomberg reported early this morning a slip of 0.8 percent in Japan’s Nikkei 225 Stock Average, 0.1 in Hong Kong’s Hang Seng Index, and 0.7 in China’s Shanghai Composite Index. Tim Riordan of Australian hedge fund Parker Asset Management Ltd., elucidated how he sees European problems increasing, as opposed to reaching a resolution. With bond yields hitting 7.29 percent, Spain is becoming somewhat of the elephant in the room. Riordan states that this is could really be a red flag indicating a downward spiral should be reason for caution.

Borrowing costs of this caliber can be indicative of a country potentially in need of a bailout in the near future. Despite the notion of this possibility, European markets were able to rise Tuesday. Currently, the strongest fear amongst investors seems to be a contagion of Spain’s monetary battles over to Italy, who’s facing issues of its own.

A few weeks back I happened upon a very economically fitting Warren Buffett quote assuring American’s they needn’t fear a recession relapse lest things in Europe get out of control and leech into the US economy. If investors’ uneasiness over debt spilling across Europe is foreshadowing for imminent future fiscal events, will Buffett’s words prove true?

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

With the International Traders Conference just over three weeks away, we thought it would be a good idea to offer anyone wanting to deepen their Forex trading knowledge a look at what goes on within the conference. The ITC is an event hosted by FXstreet.com, one of the world’s top 10 currency trading portals offering information to help traders achieve success in Forex investing. Since the conference is purely educational, FXstreet.com’s focus was directed primarily into seeking out six of the best industry professionals to help attendees become better traders. For three days, guests will be able to partake in a series of talks and interactive live trading sessions with the speakers, as well as connect with others who share the same interests as them.

What makes this event so special is its vivacious, warm, and social atmosphere. Since there is a maximum of 70 attendees each year, the event remains very personal, allowing guests to work closely with the speakers. For three hours each day, they will be able to engage in live trading sessions with each of the six speakers where they will get to follow along with their trading on their own computers and even partake in a few trades themselves.

Below are some photos taken at the last ITC, which took place in 2010:

Attendees listen attentively during Triffany Hammon’s live trading session.

A beautiful lunch waiting to be enjoyed at the Comedor.

Todd Gordon’s group during a live trading session.

Chris Capre's group partaking in a live trading session.

Some of the 2010 ITC attendees listening to a speech.

Forex industry professionals and ITC speakers Boris Schlossberg and Todd Gordon.

Attendees enjoying the delicious farewell reception spread.

The event was enjoyed by all in attendance!

Noemí, Content Director at FXstreet.com, was able to get a Skype interview with professional Forex trader and educator Rob Booker! Here, he provides insight on what the ITC is really about ---> Rob Booker Interview.

Having the opportunity to interact with others who are passionate about improving their Forex trading skills is what makes the ITC such a unique event. Here is what a four-year attendee from Greece had to say about the conference:

"I have participated to the ITC from the first venue up to the most recent. This says a lot about my liking for a venue like that. I have no relationship whatsoever with the organizers so the decision to come from my country and attend was merely based on the merits that I receive towards my strive to become a better trader. The atmosphere, the organizers and the speakers have always been exceptional.
I went the first year and then thought that I might not go again cause I had a lot of information to digest. But likely each year has been so different, especially  the info that you can implement to your trading.
For me the motivational aspect of the ITC is the biggest  bonus as you get to meet with very interesting people and exchange ideas and cultures from all over the world!!
The way the ITC is organized  is unique on how you learn,  interact,  meet  and talk to speakers. All the concepts covered are immediately analyzed and applied during the live trading sessions."

Yannis Rigos – ITC ‘07, ‘08, ‘09 and ‘10 attendee (Greece)

To learn more about the ITC 2012 which takes place in Barcelona, Spain, visit their website here. (To receive a discount of $190 USD/150€, add coupon code: mp_currensee)

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

It has been quite an exciting day here at Currensee as we’ve been receiving generous coverage on a press release published this morning by the Wall Street Journal’s Market Watch. The premise of the piece highlighted how Currensee’s Trade Leader Investment Program has grown to include over 100 institutional partners who are currently offering the program to their investors and clients.

It is interesting to look back over the timeline beginning at the programs initial inception back in October of 2010, when it was available only to retail investors. It wasn't until roughly a year later that we started providing institutional investors the option of offering the program to their clients, which include asset managers, hedge funds, family offices, introducing brokers, and other financial institutions.

The press release also illustrated how the relatively new realm of online trading platforms are reshaping the way trading happens by allowing investors some degree more control. Javier Paz, senior analyst of Aite Group, explains some components that have contributed to the monumental shifts in forex trading.

"The abundant liquidity of the Forex markets has given rise to a new breed of professional-level traders. This development, along with the popularization of trade-replication technology and prudent copy-trading rules, are the biggest developments in institutional investing since the creation of hedge funds."

The press release definitely brings into perspective just how much this facet of trading is adapting to available technology as a means of improving the way forex investors navigate the world currency markets. Thank you so much to MarketWatch, Elite Group, and the many others who found this information worthy of posting on their blogs and sites - we really appreciate it! Find the full press release here.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

A recent survey conducted by Aite Group has revealed an interesting concept: shifts in technological communication have greatly impacted the world of investing.

In December of 2011, the research firm surveyed 1,014 investor households to determine how the active retail trading markets are going about their business. The report revealed new shifts congruent with an increasingly younger trading population - namely their choices in trading platforms.

Javier Paz, Aite Group’s senior analyst and author of the report, reveals how the realm of investing is undergoing major changes. He bases his conclusions on trends such as where funds are going, who is trading them, and what exactly is being traded. One of the more prevalent movements, the “where”, was observed in the outflow of capital from large retail securities firms and private banks to online brokerage firms.

For wealth management firms, this brings about an inevitable “sink or swim” ultimatum: adapt with the changes or lose relevancy in a potentially detrimental way. According to the report, 54% of U.S. traders “trade or have traded online.” Paz goes on to illustrate a few draws of managing money online, such as access to new asset classes, an array of tools that can leverage trading success, and general added convenience.

With an increasing amount of activities becoming internet compatible, it's no surprise modernization has affected traditional stock trading as well. While still in the lead, it is becoming less commonplace as ETF and options trading gain ground, which rank a close second and third in popularity.

As Aite group looks at the internet savvy Gen Y investors, they find that approximately 50 million are of investing age. Capturing the attention of this large demographic is critical for wealth management firms because it is this group that will replace their baby boomer clients once they reach retirement. While surveying 1,000 investors (Gen Y making up about a fourth) it was found that 50% are self-directed investors, 70% place at least five trades online per year, 65 % work with a financial advisor, and 40% consider their bank as a primary investment provider.

As a growing number of tasks and functions revamp themselves into one electronic form or another, it makes perfect sense that investing has followed suit. The internet seems to provide the ideal environment for investors to maximize their trading experience. With smart phones becoming an almost permanent fixture in just about everyone’s hand, all of your trading information can now be accessed anytime, anywhere. This is appealing also in the amount of comfort investors are allowed as they can now conduct all trading interactions at their convenience. If you would like to look at Paz’s full report, it can (with membership) be accessed here.

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Aite Group recently mentioned Currensee as one of the Top 10 Trends in Wealth Management. “Copy Trading” is listed as the #7 trend on the report and shows some very positive signs for 2012.

The report refers to copy trading as “...one emerging financial service holding promise because it improves the outlook of all three pillars of wealth management (asset gathering, trading volume and fees), particularly during this period of low yields and uncertain economic conditions.”

Copy Trading CurrencyCopy trading allows investors to follow professional traders by mirroring the professional’s trades in their own personal trading account. This allows investors to gain exposure in other markets where they might not have the time or skill to trade on their own. Copy trading is also beneficial to asset managers because it can funnel millions in AUM through their office.  Managers can offer a single trader or combine a group of traders and create a fund for their clients. In short, managers can offer their clients a viable way to invest in the currency market without being a currency specialist.

In an earlier Forbes article, Aite Group goes on to say how Currensee is the leader in educating investors and managing traders. An important part of copy trading is the proper vetting of currency traders that your clients can follow. The vetting process removes unprofessional traders who don’t have the discipline to trade successfully. By only allowing the top traders to be selected, the follower or asset manager only needs to choose few different traders to create a diversified currency investment. Following a group (or fund) of seasoned forex traders can be a nice addition to the standard equity/debt portfolio.

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Trade Leader Outlook blog post written by Currensee Trade Leader, Spencer Beezley.

August is usually a difficult month to navigate for currency traders, and this August was no exception. There are a lot of issues in the world that have yet to be sorted out and traders are having trouble determining the lesser of "two evils" so to speak. On one side, you have the USA and the downgrade in credit rating and debt issues, and the lack of decision making by the FED on what to do next. And then Europe with the PIIGS and the Eurozone crisis and all the things that need to be sorted out there. This confusion was evident in the market by looking at the lack of direction the EURUSD took in August. Some volatility was evident, but the market experienced a sideways range that couldn't breakout of the 1.45 and 1.40 levels, which were tested but never significantly broken through. Now after the first full week of September, the Dollar rallied and broke that 1.40 level and is starting to gain traction against the Euro. We might see some retracement back to the upside but we need to keep an eye on all the numbers and the key technical levels to determine if this will develop into a longer term dollar rally or false movement. Watch for the fundamental developments of strong decision making in Europe and the ECB, or the Fed in the USA.

My plan for the market:

I am a firm believer in sticking with the strategies that I've had success with. However, sometimes traders get in trouble by not paying attention to certain factors in the market that could negatively affect their strategies. Since August was not a month of breakouts, we have to closely monitor price action and key technical levels of market support and resistance, as well as daily range. In August, I found that many of my targets were not reached, because of the ranging nature of the market, which is why I have exit strategies set up in case of a reversal and I certainly don't want a winning trade to be turned into a losing trade. Also, make note that I use a tight stop loss on my trades, so there may be some losses, but they are cut short in order to protect equity and to provide a solid risk/reward ratio.

One of the things that is important is to not over-trade. With my strategies, some weeks will be lighter on volume than other weeks just depending on what the charts look like. Some traders try to avenge losses immediately or during an open floating loss. This is a setup for failure as it is best to wait until the next valid trade opportunity and not to trade off emotion. In August, I noticed that the market wasn't ideal for one of my strategies, so as a result, I stopped trading that strategy until the market gets back to a place where I feel comfortable re-implementing that strategy.

Going forward through September, I am hopeful that the market will have a higher daily trading range and I believe that more valid breakouts and trends will form as traders begin to get a better feel for this current market we are faced with, and how the economies and currencies will be affected. I am also a true believer in technical analysis and stop trying to predict what is going to happen with an economy, rather let the fundamental developments play out which will all be translated into the technicals, chart patterns, and price levels of the currency in which we can base our trades and strategies from.

With chaos and confusion often comes opportunity. I am a firm believer in trading where there's a trade and holding off if the market isn't there. September's rally out of the gate is a positive trend that I'm ready to ride.

To download Spencer Beezley's Currensee Trade Leader profile please click here.