When I first was using a managed futures fund for clients, so talking 2007 or so, I stumbled into the idea that part of the past success came from interest earned on T-bills. Managed futures goes long and short some number of futures contracts that are collateralized by cash and cash equivalents like very short term T-bills. The vast majority of the assets are in cash or cash equivalents. This is true of other alternative strategies, not just managed futures.
When I had my gig with AdvisorShares, one of the funds was a hedge fund replication ETF and Kurt Voldeng who managed it was (still is I'm sure) a great source of information for all sorts of strategies. I ran this theory by him and while he did not think it was a factor, this has always stuck with me.
Fast forward to today and obviously interest rates are up, we're now starting to get interest on cash balances in brokerage accounts, it looks like the 3 month T-bill yields a little over 3% and we're almost at 4% for a one year bill. If you were getting one or two basis points on your cash balances for a while, so were liquid alt funds.
Client/personal holding StandPoint Multi-Asset (BLNDX/REMIX) has 50% of its assets in cash per Morningstar. If it is not already, that fund will soon be collecting at least 150 basis points of interest toward the entire fund AUM (3+% on half the assets). Client/personal holding Princeton Premium Fund (PPFAX/PPFIX) has 99% in cash. Where that is more of an absolute return product the three whatever percent it might get could have an even bigger impact than for BLNDX.
Do you use any future based funds? If so, how much is in cash? The yield on that cash, whatever vehicle it is in, is in the process of going up. I think this matters, I think it will be a net positive against whatever performance the actual strategy of the fund delivers. Time will prove that right or wrong but I think it will matter and I think it will help.
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