The Potential Benefits of Managed Futures

Many investors don’t want to miss growth opportunities. They would like to find a solution with seemingly less exposure to loss. Altegris believes there is an asset class with a historical track record for pursuing long-term growth that may also help to potentially reduce a portfolio’s overall volatility—managed futures.

The infographic below highlights what Altegris considers to be four key features of managed futures:

ALT_MF_Benefits_Infographic_053017_APPROVED@1x

 

The Role of Private Equity in a Volatile World

We live in a world of increasing complexity—one in which technological revolutions are unmaking and remaking every industry. The private equity model offers a way to adapt to, and potentially benefit from, these profound changes.

Private equity can also continue to help investors advance toward their financial goals despite a challenging climate. Since the 2009 market bottom, global public equity markets have seen tremendous appreciation driven primarily by quantitative easing and much lower interest rates around the world. With interest rates currently near all-time lows and equity market valuations at historically high levels, we believe financial market returns are unlikely to repeat the past eight years’ performance over the next eight years. In our view, this suggests that investment strategies with return-enhancing capabilities could play an increasingly important role in investors’ portfolios.

To view the article in its entirety, click here.

Advisors Consider Increasing Allocations to Managed Futures

At Altegris, our goal is to make alternative investments more accessible and easier to understand. Managed futures is a key component of our business and is often overlooked.

We conducted a survey to find out more about how financial advisors are using managed futures, and have put the results in the following infographic. It shows that some financial advisors are seeking further allocation to managed futures.

AltegrisInfographic_SurveyResults

Our Global Trend Watchlist for Private Equity

In today’s global landscape we see trends that hold a variety of unfolding opportunities and risks—and often they are the converse of each other. At Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”), close attention is paid to these big-picture trends as we work to source investments and systematically de-risk our portfolio companies.

A Reduction In Global Trade

Even before the last US presidential election, we were seeing a clear decline in global trade over the past several years. This trend clearly benefits companies with ample domestic markets and more reliance on local supply chains. That profile fits many firms in the US, the world’s biggest market, and others in Indonesia and India. What we might call “deglobalization” could also lead some companies, especially those with strong pricing power, to spin off some of their units, creating separate entities that could present new investment opportunities.

Increased Global Defense Spending

KKR is looking closely at this area today, especially in Europe and the US, with a particular focus on cybersecurity.

The Rise of The United States of Asia

We’re seeing a big uptick in inter-Asia exports based on trade deals and proximity. Infrastructure is a particularly interesting facet of that trade, and one where we see strong growth potential.

To view the article in its entirety, click here.

My Investment Strategy: Find Tenants Who Stay Put

After a career of nearly three decades investing in commercial real estate, it is my opinion that the sector performs best when these conditions exist: tenants are reluctant to leave because they have few options; developers have limited options to add new supply; and tenants’ demand for space is growing, requiring more real estate. Who are my dream tenants?

Before I identify them, let me back up. I invest in commercial real estate via real estate securities, which includes Real Estate Investment Trusts (REITs)1 and C-Corporations2.  Most of these companies typically specialize in one property type, giving investors the chance to invest in “pure plays” of property types they otherwise may not have investment access to, such as shopping malls, cell-tower networks, data centers, casinos or ski areas. Specialization requires that the people who put these securities together become experts in the underlying properties.

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1) A REIT (real estate investment trust) is a type of real estate company that mainly owns and operates income-producing real estate; some engage in financing real estate. Most REITs trade on major exchanges.

2) A C-Corporation generally refers to any corporation that is public and for-profit, unless the corporation elects the option to treat the corporation as a flow-through entity.

How to Potentially Enhance Equity Performance in a Climate of Uncertainty

As challenging as the investment landscape has been, we expect it to be even more so going forward. Global growth is slow, and the returns we have seen in recent years have been pulled forward by quantitative easing and the low interest-rate environment. Over the next ten years, returns are likely to be lower across all asset classes than they were during the past ten years.

In that context, we offer three themes investors can potentially utilize to enhance the returns of their equity portfolios. These themes underscore the reasons we believe private equity can be a useful component of investor portfolios in this kind of climate.

To view the article in its entirety, click here.

2017: A Challenging Year Ahead for Portfolio Allocation Decisions

Surprising many investors and pundits alike, the S&P 500 posted a solid return for 2016, finishing the year up close to 10%. If investors never looked at their statements, one might be naïve to how much markets zigged and zagged throughout the year.

Can we expect more of the same in 2017?

 

To view the article in its entirety, click here.

THE ORACLE

In May of this year, our former CEO and Chief Investment Strategist, Jack Rivkin, posted a prophetic blog post entitled, “Beginning the Look Back at What We Expected for 2016 (and Beyond).”

As many of you know, Jack will never finish his 2016 review. He passed away from pancreatic cancer this past Election Day, Tuesday, November 8th.  This was a cruel irony since there is no investment luminary, nor human being, generally, we would rather have spoken to that event on Election Day. Very few individuals come into our lives and make such a profound impact. From Jack’s intelligence, humor, empathy and love of his family, there is no comparison.

As homage to Jack, we invite you to read excerpts of his two most uncannily prescient blog posts:

The Election

In his May 2016 post, Jack led his section on the election with the late Leonard Cohen’s “Democracy.”

“I’m sentimental, if you know what I mean,
I love the country, but I can’t stand the scene.
And I’m neither left or right,
I’m just staying home tonight,
Getting lost in that hopeless little screen.
…I’m still holding up,
This little wild bouquet,
Democracy is coming to the USA.”

—Leonard Cohen

Jack wrote, “This may be one of the most democratic elections we have had in a long time. The constituencies have been motivated by non-establishment candidates on both sides to vote as they feel in terms of their innate fears and beliefs coming from the gut and the heart. This is in contrast to the more “enlightened” fears that would come from the head, calling for preservation of the system. This is what, historically, has been presented by the ‘Establishment.’

There have always been differences in the views between the two major parties of what really is important in the system, but the outcomes have been conventional and, ultimately, supportive of global commerce, finance, and an expanding role of government. In this election, the anti-establishment elements may end up determining what will appear to be a different path. Although, I would expect that the ultimate differences will not be long-lasting.”

 
On November 7, 2016, Leonard Cohen passed away.

 

Oil and the Environment

Many of you may not know that Jack was born in Oklahoma. He was also an avid follower of the impact of climate change on the environment. These two worlds collided in Jack’s January 2016 commentary, where he strayed from more conventional market outlooks; sounding alarm bells for the US oil market. While the price of crude has yet to be impacted by the recent spike in such earthquakes, however, this ‘tail risk” disruption could be just ahead.

 

An Earthquake on the Recently Discovered Cushing Fault causes Major Damage and throws US Oil Markets into Turmoil

“I don’t want to go the route of Iben Browning, forecasting an earthquake in late 1990 on the New Madrid fault that has yet to occur. However, we are seeing daily tremors in Oklahoma in the vicinity of the Cushing storage facility and pipeline system. In 2015 Oklahoma had more quakes of 3.0 or higher than any other state. Yes, that includes California. Some recent studies have identified a fault, named the Cushing fault, in the region where there is increased risk of a major earthquake in part from the introduction of ground water from fracking activity and tertiary recovery. I don’t know enough to make the mistake Iben did of putting a date on when an earthquake could occur, but if there is a disruption of the storage and pipeline systems in Cushing, for whatever reason at whatever time, it could push up the prices of refined product from shortages of crude and possibly lower further the price of crude as producers struggle to find storage and other shipment means for what they are producing. Gulf Coast refiners will likely bid up crude prices to keep the refineries going, but producers will need to move what they are producing by any means possible. It will be an interesting tug of war between the domestic producers and the refiners re who is in the best position to bargain. In the meantime offshore producers will step in to deliver oil to the Gulf Coast refiners who account for close to half of the production in the US.”

Cushing, Oklahoma experienced a 5.0 magnitude earthquake on November 6, 2016.  Despite a swarm of earthquakes that occurred after his post in Oklahoma, this one hit the closest to where the US stores is largest number of crude oil barrels.

 


Jack will be sorely missed. We are truly honored to have worked with him, and aim to continue his legacy in our every day.

If you would like to share your thoughts, memories and condolences, please email rememberingjack@altegris.com.

The Political Bull Market and Your Portfolio

In the eight years since the financial crisis, we have been in what I call a political bull market—a time when the thinking, decisions, and activities of political actors have had a disproportionate impact on the performance of companies around the globe. By “political actors,” I mean elected officials, other policy makers and NGOs as well as critics of business and the increasingly restive populations we see in various parts of the world.

As far as the coming election is concerned, we see some areas of business where the impacts could be quite different depending on outcome of the vote (see page 2). But the bigger issue—the politicization of business—isn’t going to diminish, no matter whether the next president is Donald Trump or Hillary Clinton. In fact, all indications are that it will not only continue, but accelerate. Grasping this is especially important for investors in private equity, real estate, and any other asset class involving long-term commitments.

To view the article in its entirety, click here.