You are not entering groundbreaking territory. H3, formerly run by Ascalon, now owned by Henderson, Excalibur, Bluesky (look at IS16 and IS16Q "hedge funds"), Rushton Capital; there are several CTA type funds in Australia.

Keep an eye out for the term "alternative investment manager" when reading through the descriptions and watch for asset classes including currency, index and stock futures as well as single stock equity quant funds.

For help on fund setup, get in touch with someone like Gilbert Tobin (gtlaw.com.au).

Left out "managed futures" on key terms.

Hello Cameron,

Yes, you can absolutely setup and operate a CTA in Australia. The actual steps needed depend on where you plan to look for clients...as you have to follow local laws for where the client accounts will be held. There are quite a few legal groups and brokerage groups in the US that are able to help you with structuring and registering a CTA company to gain clients here in the States. If you plan to operate a Fund, then there will be the added need to contract with a local Aussie law group that is familiar with alternative investment setups of that fashion.

There are some very well know traditional CTAs operating in Australia. Boronia Capital (formerly Grinham) as well as Non Correlated Capital and Degraves Capital all run CTA companies. I completely understand your point in that it is quite a rare investment style in your region. We see a lot more in UK/Europe than in Australia...but you are correct that the US is home to the bulk of the active CTAs. Of course, this means that investor and broker understanding of the CTA is going to be much less common in regions like Australia. You will have to tackle that issue when you begin marketing your product.

We find that most CTA type companies outside of the US operate in a Fund structure (e.g. the trading company pools client investments into a single vehicle [the Fund] and controls cash deposits as well as trading positions). So, they will advertise themselves as a general alternative investment shop which has a focus in futures and/or forex markets. You might not even see the title of 'CTA' associated with these companies given the way they advertise to meet investor appetite.

The pure CTA, which is very prevalent in the US, really centers around trading for separately managed accounts where the trading company never holds client funds...they only direct trades into a client's account that is held at an FCM, using limited power of attorney rights. The underlying trading program can operate identically to that of a Fund; the key difference is just the structure used by the client to house the overall investment.

From the client's perspective, the separately managed account structure has the bonus of daily liquidity, daily position transparency, no lock-ups, ability to add leverage, on-time tax statement reporting and no exposure to ponzi-type fraud risk of a fund manager. On the other side, the Fund structure has the bonus of lower account minimums, less paperwork to subscribe, limited performance risk (no more than total deposit), and fewer counter-parties to deal with.

I am not certain why the true CTA format (trading managed accounts) is so popular in the US and the Fund format is so popular outside of the US. One thing is for certain and that is these companies do exist all around the world and you can find them in an internet search using proper key words to classify them, as Mr. Terrebrood pointed out in his comment. If you are looking to setup a CTA and trade for managed accounts, I suggest looking at some of the requirements set forth by the National Futures Association (NFA) in the US. You will find that you can operate a CTA from virtually anywhere in the world as long as you follow the compliance laws of the country in which you are registered as well as those that govern the country where the client account is held.

Mike, thank you for the excellent and detailed response. I understand and agree with everything you've said and as such the current system just doesn't make sense to me. For someone like myself who trades a low frequency futures model there is no need to form a fund. Much better to run managed accounts where the cash remains in the client's account in the client's name. Moreover why would I even need to setup a CTA? Interactive Brokers, for example, take care of everything from allocating trades into different client accounts, to deducting fees at the end of the quarter. What purpose then would the CTA vehicle serve?

IMHO the managed account industry (especially in Australia) should be worth billions of dollars. The reason it is not is vested interests and the power of the status quo ie. retail stockbrokers and financial advisors working for pension funds maintaining the propaganda that "futures are highly risky" and "you need to buy a diversified blue chip portfolio."

Cameron, the firm which I was a responsible officer and have just left is a CTA run in Hong Kong (Altitude Capital formerly known as NoHo Capital). We use MS, New Edge and IB as brokers for our managed accounts.

http://www.hfmweek.com/events/archive/asia-awards-2012/winners

The securities and futures laws in most jurisdictions require you to setup a firm that is licensed as an asset manager, advisor or dealer.

Our firm is a type 9 regulated asset manager even though clients are run under a managed account structure. Thus the short answer to the "what purpose would the CTA vehicle serve" is to keep the operator of a managed account service offering out of the iron bar hotel.

firm: http://www.sfc.hk/publicregWeb/corp/AWR509/details

license record: http://www.sfc.hk/publicregWeb/indi/AJL563/licenceRecord

The frequency at which one trades is in no way related to being a regulated activity or not. You must prove to a regulator, and your clients, that you understand the rules of market participation and laws for provision of asset management services.

The managed account industry is certainly worth more than you realize. The CTAs in Australia already mentioned by name collectively run several hundred million dollars.

Thanks a lot Hank. Perhaps one last line of questions then. I understand there are provisions to allow people like myself, a futures trader, to run managed accounts for family and friends. In Australia does anyone know:

1. The threshold number of accounts and total dollar value beyond which you need to have an AFSL licence.

2. So long as you are below these thresholds and do not have an AFSL licence is ok to charge fees.

I called ASIC but they didn't know the answer. On their advise I'm now ploughing through the Corporations Act looking for it but I just can't find it.

I heard an unverified rumour that in Australia it is 10 accounts and $2m (in America it is 10 accounts and $20m).

Seek advice via the link I gave you.

In HK there is no exception to providing advice except for accountants, lawyers and members of the press.

In Australia most exemptions to an AFSL have been removed, even for accountants.

there are a lot of very good CTA funds in australia but maybe the professional designation 'CTA' isnt used like it is in the US.

My understanding is that CTA is an US regulation title. If one is not registered with CFTC as a CTA, he cannot publically call himself a CTA. Is this understanding correct?