By Paul Rieger
In this month's Manager's Corner Update, we are having ITB Capital Management, answer our "25 Questions Every Investor Should Ask". Plus get the latest rankings from Barclay Hedge and sign up to receive our Managed Futures Kit.
ITB is an alternative investment management firm specializing in managed futures, utilizing various options strategies. ITB is affiliated with ITB Capital Advisors, LLC, a CFTC-registered commodity trading advisor and NFA member. ITB strives to achieve positive, absolute, non-correlated returns, while diligently managing risk. We pledge to operate transparently with an adherence to the highest ethical and regulatory standards.
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25 Questions Every Investor Should Ask
1.) What is the name of the program/programs and who are the listed Principals?
Jeff Dean & Gerry Black
ITB Premium Fund I, LTD, ITB Premium Fund II, LTD, ITB Capital Income Fund I, LTD
2.) Can you provide us with some details of your corporate background?
ITB Capital Management, LLC is a registered Commodity Pool Operator (CPO) with the CFTC, and a member of the NFA, organized in August of 2005. ITB Capital Advisors, LLC is an affiliate company and is a registered Commodity Trading Advisor (CTA).
3.) Who are the Principals with trading authority?
Jeff Dean & Gerry Black
4.) Can you provide details on the principal and/or managers’ education, career and trading background?
Jeff Dean is a CPA and former Tax Attorney with a degree from NYU (New York University). He also was a Co-Owner/ COO of a large building products company that was sold to a European buyer in 2003. Gerry Black has been in the retail brokerage business since the 70’s. He is the President of James I Black & Co, an independent FINRA-member broker dealer in Lakeland Florida. Futures and options on futures have been a large part of their business since his father started the BD in the mid 60’s. His degree is in finance from the University of Florida.
5.) Which firm calculates your performance numbers?
Our numbers are calculated by our auditor/accountant Kaplan & Associates (Northbrook Ill), and verified by our fund administrator, Turn Key Hedge Funds, Inc (NYC,Chicago, Coral Springs Florida). We do not send out our statements ourselves.
6.) What is the minimum investment for your program?
Fund I - $1mm, Fund II $200K, Cap $200K
7.) Do you accept notional funding?
8.) What is your management and incentive fee structure?
2% mgmt fee, 20% performance fee
9.) What is your program’s capacity?
10.) When did you start trading this program?
11.) What type of accounts do you manage?
95% retail, 5% Institutional
12.) Can you give a brief description of your program?
The discretionary programs revolve around various option strategies, both long and short, based upon the implied volatility of the S&P 500, and the perceived movement over the life of the selected options. The options we trade are on S&P 500 futures contracts, with the great majority in bought or sold on the current front month. The objective is to generate income, combined with opportunistic long investments for hedging purposes and for incremental returns.
13.) Do you have a systematic or discretionary approach to the market and what are your program goals?
100% Discretionary (see #12)
14.) What is the average holding period for each trade?
45 Days or less
15.) Do you trade options within your program? If yes, please describe the types of options traded and how options risk is monitored.
See #12 above. Our programs provide "what if" trade analysis on a real time basis, both from a position and portfolio perspective.
16.) Are there any liquidity constraints in the markets you trade?
No, S&P futures options are one of the most liquid in the options space.
17.) In what types of market environments does your trading program do well and /or struggle?
We can perform well in all market environments, both high and low volatility. Markets moving from low to high vol or from high to low vol very quickly, provide the most challenging environments.
18.) What is the standard range of margin to equity usage for the program and how long do you hold the average trade?
Standard margin ranges from 20-40% depending on where we are in the options cycle. Average trades are held 45 days or less.
19.) How do you manage risk/reward and what metrics are employed?
Risk/Stress tests to assess individual position and overall portfolio risk based on adverse market movements are ongoing, including required margin and concentration limits.
20.) What are the optimal market conditions for your strategy?
A market that is range bound.
21.) Describe your worst drawdown to date, how did it happen and what actions have been taken (if any) to prevent similar drawdown’s?
Jan of 2008 -20.33%. At that time in our fund management, we were a pure premium seller and did not employ long positions for risk management and incremental gain. We were hurt by the Federal Reserve cutting interest rates by 75bps around a Martin Luther King holiday when the market was closed in the U.S. Our funds have morphed into a more balanced long/short volatility strategy, and less prone to larger draw downs as in this period.
22.) What are your investment goals?
Consistent absolute returns with an acceptable level of risk, while maintaining a low correlation to most market indices.
23.) What makes your program unique and different from other managers in your sector?
Our programs have a reversion to the mean framework, but with a fundamental/technical analytical overlay. Our in depth research perspective on trading levels over short term time frames, enables us to benefit from projected market movements.
24.) Do you feel you have an edge if so what is it?
The portfolio managers have been trading together for over 17 years, and 7 years in the funds.
25.) What is the one piece of advice that you would give to a new start-up CTA?
Not to deviate from your professed strategy, and to make hedging a real part of managing your clients assets.