As part of our DarcMatter Manager Series, we took the opportunity to reconnect and interview the team at Straits Financial Fund Management LLC, about the background of the firm, their strategy, and their management team. For more information, visit Straits Financial Premier Fund, here on DarcMatter.
What is the history and background of your company, principals and funds?
The Fund Manager of Straits Financial Premier Fund I, Ltd. is Straits Financial Fund Management LLC (“SFFM”), a NFA and CFTC fully registered and licensed Commodity Pool Operator. Its product is a professionally managed Futures Fund designed to meet the investment objectives of Institutional and Accredited Investors. The product is offered in smaller investing amounts of $10,000 to both U.S. and non-U.S. investors in two Feeder Fund formats: Straits Financial Premier (U.S. Feeder) Fund I, L.P. and Straits Financial Premier (Offshore Feeder) Fund I, Ltd. (“the Funds”).
More Information can be found via link below:
www.straitsffm.com and on affiliate at www.straitsfinancial.com and on parent companies: www.cwtlimited.com and www.hnagroup.com.
Mr. Mazurek, born 1956, became a registered AP of the General Partner in December 2013 and has been listed as a principal of the General Partner since December 2013. Mr. Mazurek is also the President of the General Partner, where he is responsible for overseeing the business strategy, sales and operations of the General Partner, including its arrangements with the Fund, Offshore Feeder Fund and Master Fund.
Mr. Mazurek is also currently the President of Straits Financial LLC, a futures commission merchant, a position he has held since October 2010. As President of Straits Financial LLC, Mr. Mazurek is responsible for the administrative, sales and operations of the firm. In regard to Straits Financial LLC, Mr. Mazurek has been: (i) registered as an AP since March 2011, (ii) approved as an NFA Associate Member since March 2011, (iii) registered as a swaps AP since May 2013, and (iv) listed as a principal since October 2010, all through the date of this Memorandum.
Joseph R. Randazzo
Mr. Randazzo became a registered AP of the General Partner in December 2013 and has been listed as a principal of the General Partner since December 2013. Mr. Randazzo is also a Managing Director of the General Partner, where he is responsible for overseeing the business strategy and sales of the General Partner.
Mr. Randazzo is also currently a Senior Vice President of Straits Financial LLC since May 2011. He became a registered AP of Straits Financial LLC in November 2011 and has since been responsible for the development of the Managed Futures product as well as developing futures and foreign exchange sales and he has been registered as the branch manager of the Straits Financial office in Red Bank New Jersey since July 2012.
James F. Curley
Mr. Curley became registered as an AP of the General Partner in December 2013 and has been listed as a principal of the General Partner since December 2013. Mr. Curley is also a Managing Director of the General Partner, where he is responsible for overseeing the business strategy and sales of the General Partner.
Mr. Curley is also currently a Senior Vice President of Straits Financial LLC, a position he has held since May 2011. As a Senior Vice President, he has responsibility for the development of the Managed Futures product as well as developing futures and foreign exchange sales. In regard to Straits Financial LLC, Mr. Curley became registered as an AP in November 2011.
Please explain the investment process for the strategy.
Offered in smaller investing amounts of $10,000 to both U.S. and non-U.S. investors in two Feeder Fund formats the Funds permit investor participation in alternative investment strategies, a recognized component of diversified and balanced investment portfolios. The program is uncorrelated to Equities, Bonds, or other Alternative Investments and allows exposure to liquid, transparent markets with an experienced Trading Advisor – Dunn Capital Management.
The goal of the Futures Fund is to bring one of the largest and most experienced Commodity Trading Advisors to the smaller retail investor. Dunn Capital Management, LLC (“Dunn”) was chosen to conduct trading on behalf of the Master Fund. An investment in one of the Feeder Funds allows investor access to Dunn’s World Monetary and Agriculture (“WMA”) Program, a program that has been successfully traded for 30+ years.
WMA is a 100% systematic medium to long-term trend following program, encompassing a portfolio of financial, energy, metal and agricultural futures contracts. The investment objective of Dunn’s WMA Program is to extract profits from up and down trends, resulting in a return stream that exhibits very low correlation with traditional asset classes.
It is quantitative, statistical and 100% systematic. There are no discretionary overrides of any computer-generated signals. The program is designed to capture major trends and to scale risk exposures. The latter is managed via a proprietary “Adaptive Risk Profile” program which was designed to adjust to changing market conditions.
Positions are established on regulated Futures Exchanges where price, volume and open interest are totally transparent. There are no SWAPs or other OTC esoteric, hard to price or exit contracts traded.
You discussed your investment strategy in above. Why should investors choose your fund over others with similar strategies?
There are many other “commodity pools” available to investors but Straits believes its offering is unique. Some of the reasons why are:
- The Pool Operator and Trading Advisor are fully licensed and registered. Straits has been in operation since 2010 and is the financial arm of very large parent organizations. Dunn has been in business over 40 years and their WMA flagship program has been successfully traded over 30 years. It has had a 13.7% compounded annual rate of return for over the last 30 years (net of fees and expenses).
- Dunn’s direct WMA offering is available only to Qualified Eligible Participants (“QEP”) as defined by CFTC Regulation 4.7. Through the efforts of Straits Financial Fund Management and Premier Fund I, access to WMA is now available to Accredited Investors. It is a less restrictive regulatory barrier allowing broader participation to a program usually restricted to only the wealthiest investors.
- Approximately 20% of total program Assets under Management (“AUM”) is proprietary – owners and employees of Dunn are invested alongside clients in exactly the same trading programs. As of September, 2017 the WMA programs have in total AUM of $851 million. The CTA’s own “skin” is in the game.
- There is a low correlation with traditional asset classes (stocks, bonds, real estate). 54 commodity futures are currently traded such as Energy, Agricultural, Volatility, Long and Short-term Interest Rates, Foreign Exchange, Stock Indices and Metals.
- Dunn applies an evidence-based systemic approach to identify and exploit trends in a diverse portfolio of markets, across all sectors. They can be classified as medium to long-term trend following strategies. Dunn’s research process is highly disciplined with continual focus on generating low-correlated revenue streams.
- And, there are annual audits; clean regulatory history; no personal employee futures accounts; 24/7 trading desk; current BCP procedures; trading only products on regulated Exchanges; third-party independent pricing; daily review of all transactions and Value-at-Risk; daily check-out with clearing FCMs, no buy or sell option trading, etc.
- More product details, comparisons to other programs, financial ratios, etc. can be supplied upon request.
How does your fund’s strategy fit within an investor’s broader investment portfolio?
As stated earlier, Premier Fund I offers access to a well-established CTA and their trading program whose access is normally restricted to the wealthiest of investors. Instead of allowing only Qualified Eligible Participants (“QEP”) with a worth of $10 million or greater, Premier Fund I permits access to Accredited Investors. They need only $1 million in worth exclusive of their home and they can invest as little as $10,000.
This permits the smaller retail investor access to a top CTA whose trading program is normally restricted to the wealthiest of investors.
$1,000 invested in WMA in 1984 would have generated $67,600 in profits as of 2018. In contrast, the S&P would have generated $35,036. Barclay’s CTA Index would have returned $9,726.
That, along with fair fees, no long-term lock-up of funds (monthly additions and redemptions), and no cost to exit makes Premier Fund I an attractive addition to anyone’s portfolio.
Please tell us either your highest conviction idea or trends that you find particularly interesting within your fund’s investment universe.
The Fund has “Stood the Test of Time”. The WMA has been actively traded for over thirty years by a CTA in business over forty years. They routinely out-perform their competition and the markets both in good times and bad.
WMA has provided non-correlated returns during periods of equity market stress. Since 1984, the five worse years for the S&P 500 (1990, 2000, 2001, 2002, 2008) had the WMA with an average return of 34.25%. In contrast, the S&P returned 16.64% and the Barclay’s CTA Index 11.23%.
The five best years (1985, 1989, 1995, 1997, 2013) had the WMA with an average return of 37.26%. In contrast, the S&P returned 33.47% and the Barclay’s CTA Index 10.07%.
Straits sees these trends continuing and it is the main reason why Dunn was chosen to trade the pool. They have the experience, the trading program, the risk controls, etc. that are normally only available to larger investors and in larger amounts. Through its efforts, Straits is able to bring this program to the smaller investor at levels that can fit very well within most portfolios.
What type of macro environment do you perform best in and how are you positioned for the current macro landscape?
Bull market. Bear market. Straits says “Bring it on”.
Unlike many markets, Futures allows both buying (Bullish) and selling (Bearish) trading with equal ease. There are no short sale rules and, because all transactions are conducted with established futures contracts on established and regulated Futures Exchanges, all trades are totally transparent. The price of the trade, the number of contracts traded and the final settlement price are all crystal clear and settled daily by the Futures Commission Merchant (Straits) with the Exchanges.
There are no esoteric, hard to price, difficult to exit products traded. As shown above, WMA has since 1984 out-performed the S&P 500’s five best and five worse years. It has also out-performed a basket of CTA performers tracked by Barclay’s.
For Straits and its Premier Fund I product it does not matter if the equity, bond, interest rate, energy, metal, etc. markets are strong, weak or flat. WMA has been designed to manage to all those scenarios.
What keeps you up at night?
When it comes to Premier Fund I, very, very little keeps me awake at night. That is not by accident.
When the pool was conceived we decided we wanted to do everything the right way. That is why we chose Dunn. It was why we engaged legal counsel Backer & Mckenzie, Chicago and Walkers Global, Caymans to craft the Private Placement Memorandum. It was why we chose Apex Fund Services for administration, statements and customer portal. It is why we use Straits the FCM to clear the Fund’s trades, BMO Harris Bank to hold the customer funds on deposit and Squar Milner to conduct the firm’s yearly audit.
Our goal was to create a product that would proudly carry the Straits name and meet the investment needs of investors looking to diversify their portfolios.
We believe we have been successful!!!