To accommodate varied investment objectives and risk profiles of individual and institutional clients, LJM Partners offers privately managed futures accounts tailored to your investment objectives.
Individual Managed Futures Accounts
Investment Minimum : $500,000 - 3,000,000
Note: Please contact LJM Partners for investment alternatives with minimums below $500,000
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An individual account can be managed with the following profiles:
- Aggressive (Preferred FCMs are ABN AMRO and FCStone): Annualized profit objectives are targeted at 28-40% and greater. The Aggressive account seeks to maximize returns with the commensurate trade-off of higher volatility of returns and exposure to gap movements in the S&P index. Given the potential increased variability in short term performance the aggressive investor should have a three to five year timeline or longer. The trading strategy for the Aggressive category will include short options (puts and calls) without hedging on the S&P500 futures index. The minimum investment for an individual client account traded with the Aggressive strategy is $500,000.
- Moderately Aggressive (Preferred FCMs are ABN AMRO and FCStone): Annualized profit objectives are targeted at 24-28%. Given the potential variability in short term performance the moderately aggressive investor should have a two to four year timeline or longer. The trading strategy for the Moderately Aggressive adds hedging to reduce risk and to limit exposure to gap down movements of 20% or less in the underlying S&P index. The hedging strategy will include long puts (i.e. put spreads) with the goal of reducing maximum capital loss relative to purely unhedged positions. Pricing for all instruments purchased or sold to facilitate the hedging portion of the strategy will be modeled using commercially availability risk management tools such as ProOpticus® (ProOpticus® is a registered trademark of Prime Analytics, Inc.) along with the proprietary LJM STORMsm system. The Moderately Aggressive strategy does not hedge short call exposure. The minimum investment for an individual managed client account traded with the Moderately Aggressive strategy is $1,000,000.
- Preservation and Growth (All FCMs): Annualized profit objectives are targeted at 8-14% with the goal of capital preservation (i.e. capped loss targeted at 5% or below) in down markets (including major market drawdowns) and low performance volatility in many market conditions other than when the S&P500 futures index rallies more than 5% in a 30 day period or experiences a large instantaneous gap movement. Investment timeline should be no less than two years. The trading strategy for Preservation and Growth will include a variety of derivatives trading including (but not limited to) put spreads against the S&P500 futures index, as well as short call options. Pricing for all instruments purchased or sold to facilitate the hedging portion of the strategy will be modeled using commercially availability risk management tools such as ProOpticus® (ProOpticus® is a registered trademark of Prime Analytics, Inc.) along with the proprietary LJM STORMsm system. The Preservation and Growth strategy does not hedge short call exposure. The minimum investment for an individual client account traded with the Preservation and Growth strategy is $3 million. Click here for additional information.
- Implied Volatility Signal Strategy (“VSS”)(All FCMs): The VS Strategy is based on a systematic short term trading model, and has 2 key components:
- A short term signal generation based on implied volatility,
- Dynamical asset allocation among multiple US indices depending on their risk/reward characteristics and returns correlations.
- Long Volatility (All FCMs): The Long Volatility account is designed to generate significant profitability in equity markets demonstrating high volatility and represents, in general, a negatively correlated strategy to a directional long equity portfolio. The trading strategy for the Long Volatility will include (but not be limited to) a series of long put contracts on the S&P500 futures index. Pricing for all traded instruments will be modeled using the LJM STORMsm system. This strategy will be exposed to low volatility and up-trending markets and is therefore very directional in its performance characteristics. The capital at risk in this strategy is limited to the amount invested to purchase long volatility premium. The minimum investment for an individual managed client account traded with the Long Volatility strategy is $500,000.00. Please contact LJM directly for additional discussion on opening a managed account traded with the Long Volatility strategy. Click here for more information.
Risk is allocated to achieve a target volatility of returns subject to a given cap on leverage (maximum notional exposure) as described later.
Signals. Short term implied volatility surfaces are a reflection of the near term market sentiment: rising implied volatilities identify a market nervous about a down-move; conversely, diminishing implied volatilities point to an optimistic market. The same applies to skew: when implied volatilities for downside strikes increase relative to their at-the-money counterparts, the market sentiment is more bearish; when it decreases (downside strikes cheapen relative to ATM) the market feels more bullish. It is very difficult to predict whether the information that will hit the market on a given day will be positive or negative, but even when the prediction itself is right, anticipating how the market will react is sometimes a roll of the die. However, implied volatilities contain a lot of information about how the market is likely to react in the short term to random events. This information is the basis for the signals used in this strategy’s proprietary model. At any point in time during the cash market trading hours (from 9:30 am to 4:00 pm US Eastern time) three kinds of signals are generated for each of the four major US equity indices: S&P 500, Dow Jones, Nasdaq 100 and Russell 2000 as well as Crude Oil. These signals may be to go long, short or do nothing. The actual traded instruments are the front month E-mini futures on of the indices and the front month for Crude Oil traded at the New York Mercantile Exchange. Once a position is entered at a specific level, the optimal levels to exit (i.e., to take profits or close the position at a loss) are calculated through an optimization process using back testing of tick data. These levels may vary considerably across different volatility environments. Since the predicting power of these signals is highest for short term positions, this strategy is applied intra-day and carries no overnight risk.
Risk Budgeting. Even if price correlations among the multiple underlying indices are very high, the correlations of returns when the model is applied to these instruments are substantially lower. Hence, one can decrease the strategy’s total volatility while maximizing its expected return by dynamically allocating risk across the different instruments. Analogously to the calculations to optimize the profit-taking and stop-loss signals, back-testing informs the calculation of optimal allocations to the available underlyings. Generally speaking, in high volatility environments notional positions are small and the stop-loss and take-profits levels are pretty wide. Conversely, low volatility environments require larger positions and tighter levels to exit trades. A cap on leverage is implemented to limit exposure to market gaps.
Features and Benefits of an LJM Managed Futures Account
- No Lock Up Period
- Clients can remove funds with a 5 business day notice.
- Complete Account Transparency
- Clients who open with Fortis Clearing and/or FCStone receive daily statements detailing all account trading activity.
- Clients who open with FCStone can access account status via the Internet and the RAN (“Rolfe and Nolan”) client portal. Clients who open with Fortis Clearing can access account status via the Internet and the Oasis II service.
- Client accounts are "marked to market" daily. Closing account values are updated daily.
- IRS Section 1256 Tax Treatment
- Trading activity is expected to include gain and loss from "section 1256" contracts under the Internal Revenue Code of 1986, as amended, 60% of which is treated as long term and 40% as short term gain or loss.
Notice pursuant to Circular 230. Advice expressed herein as to tax matters was neither written nor intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed on a taxpayer under the Internal Revenue Code. Such advice to tax matters is being delivered in connection with the promotion or marketing (within the meaning of Circular 230) of the transactions contemplated by this material. Each taxpayer should seek advice based on its particular circumstances from an independent tax advisor.
- Trading activity is expected to include gain and loss from "section 1256" contracts under the Internal Revenue Code of 1986, as amended, 60% of which is treated as long term and 40% as short term gain or loss.
Fees
LJM Partners is provided the following compensation for its fund management services :
- Management Fee : A 2% annualized fee is paid monthly (0.1667%) to LJM based on a client’s net liquidation value at month’s end.
- Incentive Fee : An incentive fee of 20% of profits is paid quarterly to LJM
Please read the LJM Partners Disclosure Document for a full explanation of fees. The LJM Disclosure Document must be read in its entirety before considering an investment with LJM Partners.