Member Spotlight Interview of Dan Hughes from Hughes & Company | Summary and Q&A

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May 14, 2020
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Private Investor Club - 4,000 Investors
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Member Spotlight Interview of Dan Hughes from Hughes & Company

TL;DR

Daniel Hughes from Using Company discusses their role as an introducing broker in the futures landscape, primarily serving commodities trading advisors (CTAs), family offices, and companies who trade on their own or allocate to CTAs for diversification purposes.

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Key Insights

  • 🧑‍💼 Using Company is an introducing broker specializing in the futures landscape, serving CTAs, family offices, and companies.
  • 💄 CTAs provide non-correlation or negative correlation to market events, making them valuable for portfolio diversification.
  • ⌛ CTAs adapt to market volatility differently based on their focus, but futures' inherent characteristics make them efficient during such times.
  • 🦔 Understanding the difference between CTAs and hedge funds is crucial, with CTAs primarily trading futures contracts and offering more direct access and flexibility.
  • 🐕‍🦺 Due diligence questions for CTAs and brokerage services should focus on diversification, understanding risks, and managing return expectations.
  • 🧑‍💼 Family offices can benefit from CTAs for efficient portfolio protection and exposure to specific assets.
  • 💐 The futures market offers more control and avoids issues related to certain ETFs like USO.

Questions & Answers

Q: What types of investors typically allocate to CTAs, and when should investors consider including CTAs in their portfolios?

CTAs attract investors who want exposure to specific asset classes, and it is beneficial for those seeking diversification. Investors should avoid concentration in a particular asset class and consider CTAs for the non-correlation they provide to other investments, especially during market sell-offs.

Q: How do CTAs adapt during times of market volatility, and are they built for such conditions?

CTAs have a range of returns during volatility. They might focus on specific sectors or strategies, and their primary goal is to provide non-correlation or negative correlation to overall market moves. Futures' inherent characteristics make them efficient for handling volatility.

Q: How are CTA funds different from hedge funds, and are some CTAs also referred to as hedge funds?

CTAs primarily trade futures contracts and operate as separately managed accounts or commodity pool operators. While some hedge funds use options and futures, the focus of CTAs is on futures trading. The futures market offers more direct access, flexibility, and efficiency compared to ETFs.

Q: What is the number one due diligence question that investors should ask a CTA fund when considering them for brokerage services?

Investors should ensure diversification and avoid concentration in any asset class or instrument. Additionally, they should have a thorough understanding of the risks associated with investing in CTAs, examining returns, risk profiles, and volatility to set appropriate expectations.

Summary & Key Takeaways

  • Using Company is an introducing broker that focuses on the futures landscape, serving commodities trading advisors (CTAs) and providing full-service brokerage for family offices and companies. They also introduce CTAs to qualified investors interested in diversifying their portfolios.

  • Daniel Hughes emphasizes the interest in the futures landscape from family offices, investors, and firms that want to hedge risk or include futures components in their overall strategy.

  • CTAs provide non-correlation or negative correlation to market events, ensuring that a component of an investor's portfolio does not move in tandem with the rest during a significant sell-off.

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