as CTA strategies continue to rack up gains...

Opalesque New York: Opalesque recently had the chance to speak with Patrick Welton, co-counder and CEO of Welton Investment Corporation, which manages a $500m global macro and managed futures portfolio. The strategy trades in approximately 100 markets spanning commodities, currencies, interest rates and stock indices. Welton�s Global Directional Portfolio (GDP) was incepted in 2004, has earned an average annual return of +15.44%, gained +0.87% in September, YTD returns of approximately +11%. Welton Investment Corporation is based in Carmel, California.

In Part Two of this piece, Welton discusses some of the concerns investors have expressed regarding the hedge fund industry, and how in the short term redemptions will generate opportunity for a managed futures strategy, and in the long term may be better for the entire industry.

Being uncorrelated to other strategies seems to take on an even stronger level of significance these days. It was reported that redemptions in the hedge fund industry, even if they occur in more modest numbers than anticipated could cripple an already illiquid equities market. Have you seen an increase in attention paid to your strategy as it proves itself to be uncorrelated to these markets?
I just spent a week in New York, and after multiple meetings with different potential clients your first sentence couldn�t be any truer. Being uncorrelated really has taken on a greater level of significance these days.

Many investors are profoundly disappointed right now because they always thought their �alternatives� would perform radically different than their �traditionals.� In other words, they thought they were non-correlated. As the events of 2008 have shown, however, the return drivers of both are often more closely related than many appreciated. For example, if some alternative strategies were initially viewed and benchmarked primarily as just variants of active equity and active credit, the chasm between investor expectations and reality wouldn�t be nearly as wide.

Painful as it�s been, and continues to be, the lessons of 2008 will strengthen the industry. Investors will now be able to revisit their primary purpose of an alternative asset allocation. If that purpose is to truly deliver diversification from their traditional asset holdings then alternative asset allocations will like be repurposed toward the truly uncorrelated strategies such as managed futures and broadly diversified macro that are currently being highlighted for the diversification that they actually deliver....

Source:
http://www.opalesque.com/AMB2008/47781as_CTA_strategies_continue_to_rack_up.html