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Absolute return strategies aim to generate positive returns irrespective of market direction. A more accurate and appropriate definition is that absolute return, or active investment management, always seeks to minimize losses. We mentioned this as a core attribute of an absolute return strategy in “Why an Absolute Return Strategy,” but this simple concept is worth […]

As we discussed in “Why an Absolute Return Strategy”, most investors, knowingly or not, rely on long-only passive strategies. These investors may shift between stocks, bonds and cash at various intervals, but generally their portfolio returns mimic those of well-known stock and bond indices. Alternatively, active or absolute return investors rely on many different strategies that are not dependent upon a positive market direction to generate positive returns. To continually build wealth through good and bad markets, absolute return investors require a diverse, alternative set of strategic tools. This article describes a number of strategies used by absolute return investors to help them achieve their goals.

The first goal of investing is to increase wealth or, to put it differently, to increase purchasing power. Warren Buffet says, “Rule 1 of investing is never losing money. Rule number 2 is never forget rule number 1.” The hidden message in these seemingly obvious statements is that building wealth depends much more on preventing […]

It is time for another NFA Board of Directors election. If it seems like we just asked you for your
vote, it’s because we did as you elected us to two-year terms less than a year ago. However, due to
changes to the Board’s composition, we currently find ourselves up for election yet again in the only
two contested races on the whole Board. We know that the constant stream of elections may seem
unimportant, but as someone who makes their living subject to ever-increasing regulation, taking the
time to vote for effective Board representation directly benefits your business.
One of the unique things about NFA is that it is chartered as a democratic, Member-run self-regulatory
organization. This carries with it substantial responsibilities for both Members and Management to
balance maintaining the rights of Members with protecting customers and avoiding regulatory capture
whereby the organization could be run for the benefit of a select few. For the organization to be
successful, Members need to take an active role in its governance, by educating themselves on often
complex regulatory issues, speaking out on proposed regulations, and electing Directors who put those
goals above their own personal benefit. We think that we have done the latter to the best of our
abilities and would be honored to continue serving you on the Board.

In “Bonds – More Than Meets the Eye”, we proposed that despite historically low interest rates there may be opportunities in Treasury Bonds to earn total returns well in excess of their current low yields. In this article, the second installment of a three part series, we analyze some important factors which help determine where interest rates might be headed in the near term.  This article focuses on the demand side of the supply/demand curve to understand pricing pressures. Part 3 of this series will emphasize the supply side of the curve and key determinants of interest rates including economic growth and inflation.

When buying equities, some investors plan for a short holding period, seeking to capitalize on short-term price fluctuations – “a trade”. Others plan on a longer holding period based on economic or fundamental analysis – “a long-term strategic investment”. Regardless of which tactic is employed, few schedule a specific day, month or even year for divestiture. Contrast this with the bond investor’s strategy, whereby many bondholders seek to hold their investment to its maturity date. Those bond investors possessing this predilection are likely unaware of potential opportunities that trading bonds offers. In this era of historically low yields the opportunity for outsized returns may be significantly larger than current yields advertise if one considers selling a bond prior to its maturity.

The chart above plots the performance of the Commodity Research Bureau (CRB) index, a benchmark measuring the prices of 19 diverse commodities. The legend is purposefully omitted so that we may pose the following question: If the lines represent one indicator, why are there 3 lines? The answer lies not in the commodity prices underlying the index, but in the currency used to express the prices. The blue line represents the CRB index as it is commonly expressed, in U.S. dollars (USD). The green line is denominated in euros and the black line in Brazilian reals. This graph highlights that the currency in which a commodity is denominated can have a meaningful effect on prices.