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TSWP


Total Posts: 370
Joined: May 2012
 
Posted: 2017-06-09 09:54
Can anyone share some links to documents or books or anything related to holding treasury bonds in a CTA/CPO portfolio invested in Futures?

Example: a CTA trades some US Futures in his portfolio, however not all her capital is allocated (because Futures are traded on margin), therefore a part of the AUM sits in the account doing nothing, producing no returns.

I know there are a number of options regarding what to do with that cash and I know some funds put it in US treasuries, I was curious to know if you could recommend any material on this topic, or (even better) provide your own personal insight.

Thanks.

HitmanH


Total Posts: 430
Joined: Apr 2005
 
Posted: 2017-06-09 10:35
Depends on your size.
You need a proper custody account, and someone who knows what they are doing to manage it - don't expect investors to look fondly on that...
Unless you can dedicate resource - look at money market funds, or reverse repo

TSWP


Total Posts: 370
Joined: May 2012
 
Posted: 2017-06-09 10:58
OK, I see this less happily now.

Any suggestion on what other small firms did to avoid their non-margin part of the account sitting idle?



TSWP


Total Posts: 370
Joined: May 2012
 
Posted: 2017-10-04 15:48
What is not clear to me is this: for futures portfolio the vast majority of notional capital un-allocated is usually invested in (currently) low yield gov bonds.
Right?

So why would the investors not look fondly on this, as hinted by Hitman?

If everybody's doing it...

agentq


Total Posts: 25
Joined: Jul 2008
 
Posted: 2017-10-05 05:28
As another example, take a peek at the cash portion of PIMCO's CTA fund Big Smile


https://www.pimco.com/en-us/investments/mutual-funds/trends-managed-futures-strategy-fund/inst

tabris


Total Posts: 1247
Joined: Feb 2005
 
Posted: 2017-10-05 07:28
Small firms - 1-3m ust bills

Big firms - can get very creative...

They don't look too fondly because most firms should have a page or two to investors how they manage their cash. The standard wording is something like liquid cash or cash equivalents which basically just mean GC or bills.

Dilbert: Why does it seem as though I am the only honest guy on earth? Dogbert: Your type tends not to reproduce.

TSWP


Total Posts: 370
Joined: May 2012
 
Posted: 2017-10-05 08:30
Ok, thanks guys for the input, that makes sense. GC repo probably seems less attractive than t-bills to me, but that's just me...

tabris


Total Posts: 1247
Joined: Feb 2005
 
Posted: 2017-10-05 11:34
Reverse repo is interesting in the sense that it is fully customizable on end date. Tbills are set maturity and set periods so unless you want to manage all your cash flows on days that they mature (and even then it is not entirely possible), repo market is probably your best bet there. Or you can leave money earning 0 to manage your cash flows. The opportunity cost there is between hiring a cash guy to manage it vs leaving it alone.

Dilbert: Why does it seem as though I am the only honest guy on earth? Dogbert: Your type tends not to reproduce.
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