One Chicago-based platform is ready for the managed futures boom

As many speculate about the impact of rising inflation, some investors have been waiting since the global financial crisis to see prospects pick up again in commodities and managed futures. Back in 2008, CTAs and managed futures managers had a banner year as the stock market struggled. Now though as the bull market in equities has continued to soar in recent months, commodities traders too seem to be poised to have their best year in well over a decade. Through mid-March the S&P Goldman Sachs Commodity Index was up 16% for the year-to-date, while other indexes, such as the Bloomberg Commodities Index, showed more modest gains of around 9% going into the end of the first quarter. It may have taken three decades and monumental amount of change in investor and service provider mindsets, but David Young thinks that he has gotten the formula right at the right time with New Hyde Park Alternatives’ Galaxy MAP program, which includes allocations to managed futures strategies. Galaxy has added nearly a dozen new funds over the last six months. There are over 30 different alternative investment vehicles on the Galaxy platforms, including managed futures, commodities, hedge funds, foreign equities and derivatives contracts. Added to the Galaxy managed account platform last year, were funds managed by East Alpha, John Locke Investments, PlusPlus Capital Management and Volt Capital Management. “The platform is based on the collective knowledge of myself and the others involved with the firm based on meeting with clients and managers and our own experiences within funds,” said Young in recent interview with Alternatives Watch. “We have identified the stress/friction points of managing and investing in a fund and addressed these issues with a service offering.” Industry veteran Marc Lorin also recently joined New Hyde Park Alternative Funds as chief investment officer, overseeing the Galaxy Plus, Galaxy Plus Hedge and Galaxy Plus DMA offerings of the Chicago-based firm. According to Young, the Galaxy Plus platform has seen a significant interest in pure commodity and short-term traders as of late. “We have a lot of investors who look at the commodity space as a great enhancement to yield in the normal 60/40 portfolio management,” he added. He also pointed to market participants who have seen the current trends in the market as yet another sign of the commodities super-cycle perhaps finally having bottomed out. This trend alongside the expansion of the balance sheets of monetary authorities globally raises the potential for inflation or as Young has observed offers the chance at least for some reflation. As 10-year Treasury yields rose sharply in March with the arrival of the Biden administration’s $1.9 trillion stimulus package, inflation concerns or at the very least the reflation narrative gained steam. For institutional investors, data suggest that the trade-off between bonds and equities is not going to hold up either as it has in decade’s past. One asset management report recently predicted that the traditional 60/40 portfolio may return as little as 4% annually going forward. “The recent activity of risk-on capital markets has highlighted that the need for portfolio diversification beyond stocks and bonds is as strong as ever,” Young said. While long-only commodities would offer some diversification, it could also add risk to investors portfolios as was the case in the past when a sharp decline in equities and commodities happened simultaneously. In respect to the reflation narrative, Young sees commodity-focused managed futures strategies becoming a better choice. “These strategies not only differ from buy and hold long-only commodity investments by the fact that they are actively traded, but also by the fact that they can take long or short positions,” Young said. “They can profit from moves up or down and can also take advantage of changes in relative value between two or more commodities.” There are a number of investment options out there, including traditional fund of fund structures, but what makes the managed account platform structure unique is the cash efficient basis in which the money is put to work that provides enhanced returns on the traditional limited partnership structures. Commenting after joining the firm this month, Lorin said that the platform addresses managers’ needs in that it allows them to focus on their research and trading as the platform team is able to run the middle and back-office operations. “To institutional investors, Galaxy Plus offers the transparency, liquidity, customization and prudent leverage they are seeking. I am also looking forward to working with these investors to satisfy their investment needs in alternative strategies," he said. Galaxy platform managers ADGButtonwoodDohertyDormouseEast AlphaFortGoldman (GMI)GreenwaveJohn Locke InvestmentsPlusPlus Capital ManagementPrincipaliumProfitScoreQuanticaQuantitative Investment Management (QIM)QuestROW