Going "GREEN" - How the Rich Get Richer
By Doug Singer
September and October of 2008 were one of the most hostile trading environments in modern stock market history. This time frame will serve as a “test of fire,” or measuring stick for evaluating how money managers performed. During this time the S&P 500 experienced a 25% decline, the largest on record since 1930. In the twelve months preceding October 30, 2008 the average diversified mutual fund, according to Lipper Inc. was down 40%.
The financial world was crumbling. Now, with a little time for hindsight, I decided to go looking for survivors. Did anybody fare well during this time when seasoned veterans were losing their shirts? Are there strategies that would have left the average investor unscathed, or at least in better shape?
What I found clearly standing head and shoulders above the pack was an asset group termed ‘Managed Futures.’ Cozzene Advisors, a Managed Futures specialist and introducing broker (IB) thrived during this period. Their key seems to be that they have access to exclusive Commodity Trading Advisors (CTA) that trade different types of futures on all types of commodities, generating returns that are non-correlated to traditional stock and bond portfolios. My gauge of their performance started with the aforementioned wrath of September and October of 2008. Two Managed Futures programs available under the umbrella of Cozzene Advisors were both profitable in September and October 2008, each up 6.55% and 5.13% and 4.47% and 3.16%, respectively. Such extraordinary returns during such a difficult time seemed highly improbable, so I decided to take a closer look.
The ability of futures to enhance the returns of traditional investments was documented in a study conducted by Goldman Sachs. Covering a 25-year period, the study concluded that by "allocating only 10% of a securities portfolio to commodities, investors can vastly improve their performance." Goldman Sachs' conclusion was supported by another study published by the Chicago Mercantile Exchange (CME), one of the world's pre-eminent futures exchanges. According to the CME study, "Portfolios with as much as 20% of assets in managed futures yielded up to 50% more than a portfolio of stocks and bonds alone." Additionally, as outlined in the chart, Managed Futures seem to be an incredible hedge against significant stock market downturns. With almost no correlation to stocks, one of the most attractive features of Managed Futures appears to be its ability to add profound diversification to an overall investment portfolio. Cozzene’s website (www.bestmanagedfutures.com) gives detailed descriptions of the various managers they use, offers an education on Managed Futures, as well as outlines the risks involved.
So, why is it that the average investor has not been introduced to this valuable portfolio tool? Well, for starters it seems to be somewhat of a rich man’s game. With minimum investments ranging from $50,000 - $250,000 and a required total invested portfolio in excess of $500,000, there is somewhat of a barrier to entry. With that said, Cozzene Advisors has been generating extremely generous returns for their investors for five years running. This is no Madoffesque scheme; rather it is one of the most transparent investment vehicles that I have ever come across.
Although it is possible to invest in Managed Futures with your own broker, one of the reasons that Cozzene Advisors has done so well is that they have proven guidelines for the CTA’s with whom they work and have a distinct advantage as a smaller boutique firm. Their average CTA is managing $50-100 million. Conversely, the larger, more commercial brokers are trading in the billions. The relevant point is that due to sheer size, the larger funds are much less agile than the smaller ones. If the market turns on them, they can’t easily exit. To sell out a large position, they could single-handedly cause a capacious downslide in the price. So, the smaller, boutique trading experts can move much more quickly and efficiently. This creates an environment where experienced, talented traders can generate significant results. It appears that everyone, no matter the size of their portfolio, could benefit by some exposure to Managed Futures.
September and October of 2008 were one of the most hostile trading environments in modern stock market history. This time frame will serve as a “test of fire,” or measuring stick for evaluating how money managers performed. During this time the S&P 500 experienced a 25% decline, the largest on record since 1930. In the twelve months preceding October 30, 2008 the average diversified mutual fund, according to Lipper Inc. was down 40%.
The financial world was crumbling. Now, with a little time for hindsight, I decided to go looking for survivors. Did anybody fare well during this time when seasoned veterans were losing their shirts? Are there strategies that would have left the average investor unscathed, or at least in better shape?
What I found clearly standing head and shoulders above the pack was an asset group termed ‘Managed Futures.’ Cozzene Advisors, a Managed Futures specialist and introducing broker (IB) thrived during this period. Their key seems to be that they have access to exclusive Commodity Trading Advisors (CTA) that trade different types of futures on all types of commodities, generating returns that are non-correlated to traditional stock and bond portfolios. My gauge of their performance started with the aforementioned wrath of September and October of 2008. Two Managed Futures programs available under the umbrella of Cozzene Advisors were both profitable in September and October 2008, each up 6.55% and 5.13% and 4.47% and 3.16%, respectively. Such extraordinary returns during such a difficult time seemed highly improbable, so I decided to take a closer look.
The ability of futures to enhance the returns of traditional investments was documented in a study conducted by Goldman Sachs. Covering a 25-year period, the study concluded that by "allocating only 10% of a securities portfolio to commodities, investors can vastly improve their performance." Goldman Sachs' conclusion was supported by another study published by the Chicago Mercantile Exchange (CME), one of the world's pre-eminent futures exchanges. According to the CME study, "Portfolios with as much as 20% of assets in managed futures yielded up to 50% more than a portfolio of stocks and bonds alone." Additionally, as outlined in the chart, Managed Futures seem to be an incredible hedge against significant stock market downturns. With almost no correlation to stocks, one of the most attractive features of Managed Futures appears to be its ability to add profound diversification to an overall investment portfolio. Cozzene’s website (www.bestmanagedfutures.com) gives detailed descriptions of the various managers they use, offers an education on Managed Futures, as well as outlines the risks involved.
So, why is it that the average investor has not been introduced to this valuable portfolio tool? Well, for starters it seems to be somewhat of a rich man’s game. With minimum investments ranging from $50,000 - $250,000 and a required total invested portfolio in excess of $500,000, there is somewhat of a barrier to entry. With that said, Cozzene Advisors has been generating extremely generous returns for their investors for five years running. This is no Madoffesque scheme; rather it is one of the most transparent investment vehicles that I have ever come across.
Although it is possible to invest in Managed Futures with your own broker, one of the reasons that Cozzene Advisors has done so well is that they have proven guidelines for the CTA’s with whom they work and have a distinct advantage as a smaller boutique firm. Their average CTA is managing $50-100 million. Conversely, the larger, more commercial brokers are trading in the billions. The relevant point is that due to sheer size, the larger funds are much less agile than the smaller ones. If the market turns on them, they can’t easily exit. To sell out a large position, they could single-handedly cause a capacious downslide in the price. So, the smaller, boutique trading experts can move much more quickly and efficiently. This creates an environment where experienced, talented traders can generate significant results. It appears that everyone, no matter the size of their portfolio, could benefit by some exposure to Managed Futures.
