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By Mallory Horejs, CFA | 06-14-2012 02:00 PM

Analyzing a 3-Pronged Approach to Managed Futures

Ramius' Bill Marr discusses the multiple strategies behind this growing trend in liquid alternatives as well as the structure of his firm's recently launched fund.

Mallory Horejs: Hello, my name is Mallory Horejs, and I am alternative investments analyst here at Morningstar. Today with me, I have Bill Marr, president and CEO of Ramius Trading Strategies.

Bill thanks for joining us today.

Bill Marr: My pleasure.

Horejs: Bill, your firm specializes in managed futures strategies, and historically these have only been available to investors through private placement with monthly liquidity. As a manager, have you needed to adjust the strategy at all to accommodate the 40 Act structure?

Marr: You would think, given that this is a strategy that's been available monthly liquidity, higher minimums, K-1, and you take the same strategy and bring it into a daily liquid format with low minimums and 1099. Well, our experience is that we haven't altered it at all. We run private placement products, and we run mutual funds. And we run them exactly the same with the same managers.

Horejs: This has been a big area of growth in the liquid alternatives space. The first fund launched back in 2007, and today we have more than 30 funds. We've seen about three different types of flavors. You have your index-tracking strategies, single-manager strategies, and then the fund of CTAs. Could you discuss those with me and explain the pros and cons of the different approaches?

Marr: Sure. So, the index products, as you mentioned, were first. They tend to track the S&P DTI Index. The advantages are that it's very inexpensive, and the leverage is quite low, so it has to fit a lot of guidelines within asset-allocation models. So, there has been a lot of growth, about half of the assets are from the DTI trackers. The problem is that the performance has not been very good, even over a five-year period of time. The single-manager CTA products that we have are active managers that are dedicated to research, that are innovating, mostly trend-following managers. They are more expensive than the trackers, but less expensive than the multimanager products. And in our space, we're a multimanager, which has its advantages, as well. Obviously, it's going to be more expensive product, but it's able to capture a lot more opportunity sets than either of the other two types of strategies.

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