10.28.2014

CTA Embraces Managed Accounts

10.28.2014
Terry Flanagan

Commodity trading advisor Dunn Capital Management uses managed-account platforms to enable investors who have less than the $10 million minimum required to open a separately managed account to participate in Dunn’s managed futures trading program via a pooled investment vehicle.

“When I have somebody that comes to me that only has $4 million or $5 million, rather than turn them away, I can point them to one of these managed-account platforms where we’re already trading an account and it allows them to get the same benefits of a managed account without having to put up the large amount of capital,” said Marty Bergin, president of Dunn Capital Management.

For investors, managed-account platforms provide a third-party administrator that performs due diligence on their behalf. “They are able to take advantage of the economies of scale that are on the managed account platform,” Bergin said. “If they had to go out and get their own administrator and get their own risk management firm, it would cost a lot of money whereas by accessing the platform they can get it much cheaper.”

For the CTA, managed-account platforms offer economies of scale. “I only see it as one account. I don’t have any headaches or any issues with dealing with the individuals,” Bergin said. “I’m dealing with the platforms and providing all the transparency to that platform. These platforms are extremely sophisticated. They have the ability to look all the way through at individual positions at any given time.”

However, managed-account platforms also entail some added expenses that have to be factored in. “The negative side is they have to pay an extra fee to be on a platform, as opposed to giving capital directly to the manager,” said Bergin.

Bergin recently participated in a forum on managed account platforms presented by Gemini Alternative Funds. Dunn Capital has a UCITS fund that is available Gemini’s platform. “We’re only on a very select few platforms because we don’t want to be on a platform that’s a marketplace,” said Bergin.

Deutsche Bank’ dbSelect is one of the largest managed account platforms for accessing strategies in FX, CTAs and other liquid trading strategies, with more than 100 hedge fund programs to choose from, and which has attracted $4 billion in assets under management from pension funds, fund of funds, private banks, insurance companies and others.

“It’s the place you can go to get anything and everything,” Bergin said of dbSelect. “We’re more interested in managed account platforms that are more selective and do a lot deeper due diligence on the managers.”

Featured image via Nonwarit/Dollar Photo Club

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