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Call us at 800.311.1145 to speak with one of our alternative investment specialists. We answer the phone in One Ring. Try It.Sign up to view performance on 100s of Managed Futures Programs, Trading Systems, and Managed Forex Programs. Sign up FREEWhat are Managed Futures? Is this the same as CTAs? How do I invest? Click here  to learn all of this and more on our extensive managed futures education pageHow to set watchlists? Build portfolios? Find correlations? and more. Click here to take a tour of our advanced toolsUse our most popular tool to create custom multi-program portfolios. Click here to get started today by signing up for FREE ACCESSClick below to learn how attain can assist your CTA in everything from back office creation and trade execution to finding a lawyer to create your D-DocNo upfront fees for managed futures funds is one of the unique benefits of a managed futures account at AttainOur alternative investment books list includes some of the most thought provoking and interesting books on alternative investmentsLearn how family offices outsource the managed futures research, due diligence, data collection, and ongoing monitoring of accounts to AttainWhat is a trading system? Who develops them, and how are they executed for client accounts? Our trading system education explains this and moreWe assist talented traders in getting their trading ideas into an automated trading system, do testing, marketing, and more

CTA Spotlight: Clarke Capital Management

April 14, 2008

 

While our CTA spotlights usually highlight a specific program of a particular manager – this week’s CTA spotlight focuses more on the manager, versus that manager’s programs. That is because this particular manager controls over $175 Million across EIGHT different CTA programs and two funds, all of which are ahead by double digits so far in 2008. And he’s been doing at it for close to 15 years, which is more experience than several other top CTAs combined.

The stats are impressive, ten successful programs all up between 16% and 57% this year, after gaining between 3% and 43% last year - and a combined 997 months of track record (or 83 years of data across all of the programs). For those of you out there who like a large sample size, you won’t find many CTAs with more history to pore over. (Past Performance is Not Necessarily Indicative of Future Results).

This week’s CTA Spotlight is on an old standby in the managed futures business, Clarke Capital Management.

Who is the Manager:

The manager of the Clarke empire is none other than Michael J. Clarke, who lives here in the Chicago area and has been involved in the futures industry since the early 1980’s. Michael received a BA in economics from the University of Cincinnati, and quickly found himself involved in derivatives after working a deal to use his programming skills in exchange for some hands on education learning the “option arbitrage business” from a Chicago Board Options Exchange member firm.

Clarke was involved in options up until the market crash of 1987 and its aftermath, and luckily for him and the firm he was trading for, he was a premium buyer, meaning he came out of the ’87 crash looking better than most. By 1989, Clarke found himself wanting out of the options game, and in possession of computer skills which lent themselves to modeling trading systems for use on futures markets.

He spent the next several years working on his models for the futures markets, and in 1993 decided they were at a point where he thought he could manage client money with them. The rest, as they say, is history; as Clarke proved he could indeed manage money with his models, running assets under management up as high as $396 MM towards the end of 2004.

You might think such a success story would end with Mr. Clarke riding off into the sunset, but he is not ready for that by a long shot, remaining the chief trader and researcher for Clarke Capital Management. He has brought on some help to work on accounting and modeling as the firm has grown to 4 employees – but isn’t about to hand over the reins any time soon.

When not programming some new code or researching a new idea, Michael likes to keep in shape playing tennis or basketball, or keep his game theory sharp by indulging in some Hold ‘Em poker. His wife Carol and he have a twin son and daughter, whom are both attending their first year of college.

How does the program work?

Clarke has several different programs – 6 of which are listed on Attain’s website as available CTA programs – making it difficult to describe how the “program” works, but luckily the programs are highly correlated to one another and do share a good deal of logic.

All of Clarke’s programs can best be described as trend following programs, which utilize multiple different models across multiple different markets. These various models range from intermediate term models where winning trades last around 15 days and losers around 5 days – to ultra long term models in which trades last 4 to 10 times longer.

The main differences between the various Clarke programs lies in each one’s combination of markets and models. Clarke has basically mixed and matched the different models to come up with his many different programs, sometimes pairing multiple shorter term models on a small number of markets, and sometimes pairing short and long term models on a greater number of markets.

The rough breakdown of how many models and markets are used in each program is listed below:

Clarke Capital Program Comparison






Worldwide

Global Basic

Global Magnum

Millennium

Orion

Jupiter

Min. Investment

$250K

$100K

$100K

$1,000K

$200K

$3,000K

# of Markets

29

17

17

46

29

61

# of Models Used

9

5

8

25

7

66

Model Types

interm.

interm.

interm.

interm.

interm.



long term



long term

long term

long term





very long term


very long term

As can be seen above, the more markets and models used in a program – the higher that program’s minimum investment. You have to pay to play, as the saying goes; and the higher minimums are required to cover the possible margin use on the larger portfolios.

Something that is rather unique to Clarke is that stock index futures are not included in any of his portfolios. They are more skewed to interest rates than many other multi-market, multi-strategy advisors – with currencies, grains, softs, metals, meats and fuels, both foreign and domestic rounding out the portfolios.

One common feature across all programs is their use of filters to weed out trades during potential choppy periods. One such filter Clarke believes is unique to their programs. He calls it the Fuzzy Logic Filter, and says: “The fuzzy logic trend filter examines trends from very short to very long and every point in between for that commodity, and sees what has worked in the past and it makes a decision whether to go, or not to go”. This filter eliminates 80% to 90% of signals, according to Clarke, which seems like a big number until you consider just how many signals must be generated by the copious amount of models he uses.

Finally, each of the programs uses a blend of different exit strategies which include volatility and dollar based stop, as well as dynamic trailing stops based on time or a portion of profits to protect. The final piece of risk control is a daily calculation of the risk across all open positions and any new positions to be put on, calculated as the difference between the closing price and stop price for each market.

Attain Comments:

With most trend following programs seeing losses in March due to the mid-month sell off in commodity prices (Gold went from $1,030 to $875 for example), we were holding our breath to see how much Clarke lost across each of his programs in March….only to be pleasantly surprised to see hefty gains in March.

This gain impressed us more than the nice returns last year, or gains in the first two months of 2008, as it separated Clarke from the rank and file trend followers whom saw losses due to the March commodity sell off. This ability to avoid the March losses was likely due to the inclusion of the intermediate term models in many of the programs, but also due to the program’s exposure to interest rate and currencies (which tends to run higher than other trend followers). Interest rates and currencies did not have the sharp reversals in March that were seen in markets like the metals and softs. Whether having this portfolio composition in March makes him lucky, or good, is up for debate – but with so much history behind him, we’ll give him the benefit of the doubt and call it skill.

Clarke does a few things which are a little out of the norm for CTAs. One, he doesn’t compound your capital for you and increase positions as equity increases or decreases, instead relying on the investor to provide instructions on when to increase or decrease treading levels. This has likely saved him in the past, as trend followers are notorious for building up profits, then putting on a greater number of contracts on new signals at the higher equity levels, only to see the trend environment go into a tough period right when more contracts were added, resulting in losses greater than the profits built up, despite the program as a whole not suffering as much. But it is worth noting that your capital would not have the compounding effect over his 12 plus years without intervention on behalf of the investor.

Finally, Clarke’s goes almost completely contrary to other CTAs in that he allows clients to time his programs. That is, clients are welcome to start and stop as they see fit, perhaps liquidating at equity highs after a nice run and jumping back in after a drawdown phase. As long as clients don’t “abuse the privilege”, Clarke says, he is happy to let them get in and out, saying “it’s their money”.

All in all, it is a treat to see a program in its 13th year of trading posting new all time equity highs. For every Clarke, there are definitely many programs which didn’t survive as long, but Clarke lets us know that managed futures can have very nice performance not just for a quarter or year, but across a decade. And it puts our managed futures investments in prospective. How many clients of Clarke’s probably stopped trading the program after losses in 2005 and 2006, only to completely miss the rebound in 2007 and thus far in 2008. Such programs should be viewed as long term investments, and options of sorts on global instability.

To view the various Clarke programs, please click here: http://www.attaincapital.com/cta_performance/search/clarke

- John Cummings

IMPORTANT RISK DISCLOSURE


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Feature | Week In Review: Commodities Rally; Stocks Choppy Last Week: | Chart of the Week

***Overview***

With the summer driving season fast approaching Crude Oil futures traded at a new record high of 112.21 per barrel last week due to production disruptions around the globe. Prices in the other energy markets followed suit with Heating Oil futures climbing +7.25%, Natural Gasoline futures were up +6.21%, and RBOB Gasoline futures rose +1.84%.

Stock futures had another rough week as the early earnings season returns are looking very poor. The market sold off hard on Friday after GE reported that they would miss Wall St. estimates for the first quarter of 2008. The conglomerate also told investors that growth would be limited for the coming year which only fueled speculation that the US Economy is indeed in a recession. For the week SP futures fell -2.65%, NASDAQ futures were down -3.40%, and Dow Jones futures lost -2.15%. In smallcap trading the Russell 2000 futures -3.57% and SP Midcap 400 futures -1.83% both finished the week in the red as well.

Currencies & Bonds had a slow week of trading although the US Dollar finished another week in the red. US Dollar Index futures were down -0.41% for the week as investors continue to prefer foreign currencies to the greenback. Euro Currency futures finished the week up +0.73%, Swiss Franc futures were up +0.93% and Japanese Yen futures gained +0.85%. In bond trading the benchmark US 10 Year Note futures finished the week unchanged while US 30 Year Bond futures were up slightly at +0.47%.

Commodities had a mixed week across all sectors. In the metals Gold futures +1.51% and Palladium futures +6.96% finished higher while Silver futures were down slightly at -0.37%. In the grains Soybeans were up +4.25% while Wheat futures -8.17% and Corn -0.78% finished in the red. Finally in the softs Sugar futures gained +6.65% due to rising energy prices and Cotton futures were also up at +4.47%. Coffee futures headed in the other direction however losing -+0.85%.

***CTAs***

Following a fabulous start to the year for many of the CTA's we track it seems hardly fair to begin to judge them on their Q2 potential - but we can try...

With only 9 trading days under our belt thus here are a few estimates of the biggest movers in April thus far- Vision Capital +9.13%, Ascendant S1 +5.10%, Dighton USA +2.21%, FCI +1.92%, NDX Shadrach +1.89%, Wallwood FX +1.76%, Attain Portfolio Advisors +1%, Rosetta -1.41%, Fit FX -3.57%, and K3 FX -9.58%.

Looking ahead to the rest of the month and 2nd quarter the one sector of mangers that I think has the most to prove is the option sellers (i.e short volatility trading). With the stock market seemingly shoring up its credit issues and majority of short option traders experiencing the worst 3-6 month stretch in recent history the next 3-6 months has the potential for mangers in this space to "get back to business".

For many investors the most exciting aspect of trading options is that there are typically more winning months than losing months and in the case of mangers like Zenith the winning month percentage is as high as 94% (past performance is not necessarily indicative of future results). The catch is that many mangers had not been playing things as conservative as Zenith and were trading much closer to the market which in turn has translated into larger than expected drawdowns. If and when markets return to more consistent trading ranges we expect that these mangers will have their "day in the sun" once again and have a chance to make up for the recent performance. Some mangers to watch - ACE Investment Strategists, Diamond Capital, and Zephyr Asset Management.

Finally, we ask that you remember the importance of portfolio diversification and remind you can combine the performance of your favorite CTA's via our website - http://www.attaincapital.com/portfolios.

***Day & Swing***

For the first time in several months it was a slow week across all futures markets. Markets were still moving with equities declining, bonds gaining and commodities making a push higher but the pace was much different than we have become accustomed to seeing in the recent trading environment. Systems were extremely quiet with several programs not trading at all last week.

Top performers of the day trading systems were Kappa 12/1 Dax + $375.17 and BetaCon 4/1 ESX +$366.10. Kappa was the more active of the two with three trades for the week compared to one trade by BetaCon. Waugh eRL finished the week in the black by +$146 on three trades.

On the losing side, Compass SP lost -$1,550 on four trades but finished the week on a positive note with a ten-point winner. Rayo Plus Dax had a tough week with losses of -$4,641.17 on three trades.

Swing trading systems were little changed with the lack of activity in the markets. Signum continues to hold long in the TY while short the EBL. Jaws US 400 went long on Wednesday and was up ~ +$610 heading into the weekend. Mesa Notes is holding short in the TY and still in the black by over a basis point. Tzar is mixed with a long position in NQ and short positions in eRL and ES. The PGA Powergrowth 2 portfolio came into the week slightly net long but will look to enter into new positions as the market breaks out of this consolidation pattern.

Please note that some day and swing trading systems will be coming down from our site temporarily as we work though some technical difficulties on our new website marking certain systems to market, and combining other systems in portfolios.

***Long Term***

Moderate weakness in the U.S. dollar prompted support in soft commodity, metal, and interest rate activity last week, although the high volatility of the past few months subsided a bit as the markets seemed to take a breather. A quick look at market activity in most commodity sectors seems to indicate consolidation or sideways action as the battle between recession and inflation has left market participants treading lightly looking for breakouts of the past highs or lows. Overall most long-term trading systems are now on the sidelines as recent corrections in the performing markets have seen enough of a correction to prompt position liquidation.

Aberration is currently long TY with a current gain of $10,730.50 (open trade). Both Aberration and Relativity are Short the U.S. Dollar Index making $2,520.00 (open trade) and making +$415.00 (open trade). Relativity is also long MP making $+175.00 (open trade)

The food/grain sectors were basically a mixed bag during the past week as soybeans posted strong gains on ideas that the USDA report was maybe a little off base on their planting intention figures. Wheat was again under pressure from indications that the large spring wheat plantings might solve longer term supply issues. Supply pressure seemed to subside some in the livestock sector as very strong international demand has sparked higher wholesale prices which was indicated by a release showing year on year pork exports running at least 20% higher. Relativity is currently long corn making +$50.00 (open trade).

IMPORTANT RISK DISCLOSURE
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.

Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.

Please read carefully the CFTC required disclaimer regarding hypothetical results below.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.