Risks of Investing in Hedge Funds and Managed Futures

PLEASE READ THE FOLLOWING STATEMENT CARFEULLY

When considering alternative investments, such as hedge funds and managed futures, you should consider various risks including the fact that some hedge fund and managed futures products use leverage and other speculative investment practices that may increase the risk of investment loss, can be illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager.

With respect to alternative investments, such as hedge funds and managed futures, in general, you should be aware that:

  • Returns from some alternative investments, including hedge funds and managed futures, can be volatile
  • You may lose all or portion of your investment
  • With respect to single manager products, the manager has total trading authority. The use of a single manager could mean a lack of diversification and higher risk
  • Many alternative investments that include hedge funds and managed futures are subject to substantial expenses that must be offset by trading profits and other income. A portion of those fees is paid to Altegris
  • Trading may take place on foreign exchanges that may not offer the same regulatory protection as US exchanges

With respect to an investment in a hedge fund or managed futures fund, you should be aware that:

  • There is often a lack of transparency as to the fund's underlying investments
  • With respect to hedge funds of funds, the fund's manager has complete discretion to invest in various sub-funds without disclosure thereof to you or to us. Because of this lack of transparency, there is no way for you to monitor the specific investments made by the hedge fund or to know whether the sub-fund investments are consistent with the hedge fund's historic investment philosophy or risk levels
  • A hedge fund of funds invests in other funds and fees are charged at both the fund and sub-fund level. Thus the overall fees you will pay will be higher than you would pay by investing directly in the sub-funds. In addition, each sub-fund charges an incentive fee on new profits regardless of whether the overall operations of the fund are profitable
  • There is no secondary market for fund interests. Transfers of interests are subject to limitations. The fund's manager may deny a request to transfer if it determines that the transfer may result in adverse legal or tax consequences for the fund

A hedge fund's Offering Memorandum or a money manager's Disclosure Document describes the various risks and conflicts of interest relating to an investment and to its operations. You should read those documents carefully to determine whether an investment is suitable for you in light of, among other things, your financial situation, need for liquidity, tax situation, and other investments.

Keep in mind that the past performance of any investment is not necessarily indicative of future results. You should only commit risk capital to any investment product. Alternative investment products, including hedge funds and managed futures, are not for everyone and entail risks that are different from more traditional investments. You should obtain investment and tax advice from your advisors before deciding to invest.

NOTES REGARDING COMMODITY TRADING

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.

THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.

IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR ("CTA").

THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") REQUIRE THAT PROSPECTIVE CLIENTS OF A CTA RECEIVE A DISCLOSURE DOCUMENT (WHEN THEY ARE SOLICITED) TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT'S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. THESE DOCUMENTS ARE READILY ACCESSIBLE AT THIS SITE. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT(S) OF THE CTA(S) OF WHICH YOU ARE INTERESTED AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. YOU ARE ENCOURAGED TO ACCESS THE DISCLOSURE DOCUMENTS BY CLICKING ON THE "CTA DISCLOSURE DOCUMENT DOWNLOAD" BUTTON ON THIS SITE. YOU WILL NOT INCUR ANY ADDITIONAL CHARGES BY ACCESSING THE DISCLOSURE DOCUMENT. YOU MAY ALSO REQUEST DELIVERY OF A HARD COPY OF THE DISCLOSURE DOCUMENT, WHICH ALSO WILL BE PROVIDED TO YOU AT NO COST. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR ON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE DOCUMENT.

OTHER DISCLOSURE STATEMENTS ARE REQUIRED TO BE PROVIDED YOU BEFORE A COMMODITY ACCOUNT MAY BE OPENED FOR YOU.

CERTAIN CONFLICTS OF INTEREST

  • In working with clients, Altegris acts in its capacity as a SEC-registered Broker-Dealer and a CFTC-registered Introducing Broker. Although we may give advice that is incidental to our brokerage services, we are not an Investment Adviser. Altegris has entered into selling agreements with all of the investment products that we offer (including investment products of our affiliates), pursuant to which we are paid fees by the investment products or their managers in connection with sales we make. This enables us to offer products without charging fees above those charged by the products or managers
  • In addition, Altegris may act as an introducing broker for individually managed futures accounts and to some of the funds and as such, may receive a portion of the commodity brokerage commissions they pay in connection with their futures trading or receive a portion of the interest income (if any) earned on an account's assets
  • Certain CTAs (Commodity Trading Advisors) may also pay Altegris a portion of the fees they receive from accounts introduced to them by Altegris
  • Fees vary among different investment products and may be high. With respect to managed futures products, you are responsible for negotiating both brokerage commission rates and the amount of interest income credited to your account, as well as any management and performance fees you pay to any CTA trading your account. As a result, there exists a conflict between Altegris's interest in maximizing the commissions and fees paid by you (in which it will participate) and your interest in minimizing those commission and fees. Altegris, its affiliates, principals and employees may own, or may purchase, an interest in the investment products shown on this website
  • The compensation Altegris receives from various products it sells, its profits, and its salespersons' compensation, may vary by product and over time

Before seeking any advisor's services or making an investment in a hedge fund or managed futures fund, investors must read and examine thoroughly the respective Disclosure Document or Offering Memorandum.

Altegris selected the investment products displayed on this website from the alternative investment products it markets and sells and for which it is paid. The universe of investment products is substantially larger than those offered by Altegris and contains other investment products that may offer lower fees, higher returns and/or lower risk. Some investment products shown on this website may be sponsored by Altegris or its affiliates and may be subject to various conflicts of interest and high fees, a portion of which will be paid to Altegris and its employees.

If you were referred to Altegris by John Mauldin through Millennium Wave Advisors, LLC (MWA) or Millennium Wave Securities, LLC (MWS) (each of which do business as Millennium Wave Investments), please note the following: John Mauldin is the President of MWA, which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of MWS, a NASD registered Broker-Dealer, Commodity Pool Operator (CPO), Commodity Trading Advisor (CTA) and an Introducing Broker (IB) registered with the CFTC, and a member of the NFA is such capacities. Altegris pays MWS 1/3 of fees Altegris receives from funds it sells to clients referred to Altegris by MWS. Additionally, Altegris pays MWS up to 1/3 of the commodity brokerage commissions and interest income Altegris receives from managed futures accounts of clients referred to Altegris by MWS.

Information presented on this site has been obtained from sources that Altegris Investments believes to be reliable. However, Altegris has not and cannot verify the accuracy of such information, and potential investors should be aware that such information is subject to change without notice.

Not all products and services described on this website are available in all jurisdictions, and certain investments may not be suitable for all investors. Certain investment products that are available to U.S. persons have not been registered with any federal or state regulator, and as a result are available only to certain qualified investors. Qualifications vary from product to product.

Any information on this website referring specifically to investment products offered by Altegris is only available to view by qualified persons with a username and password obtained by registering and qualifying. By registering you understand that Altegris may, at its sole discretion, send you information (electronically or otherwise) on various products it offers that it believes are suitable for you and you expressly consent thereto. You may notify Altegris in writing at any time to remove your name from its product distribution list. The information on this website should not be construed as investment advice. You should obtain independent investment and tax advice before deciding to invest.

Past results are not indicative of future results. There is risk of loss when investing in managed futures or hedge funds.

The information contained in this website may not be reproduced, reorganized or used to create any financial product including an index. This information is for informational purposes only and is provided on an "as is" basis. The user assumes the entire risk of its use. Altegris, International Traders Research (ITR) and their affiliates expressly disclaim all warranties of originality, merchantability, or fitness for any particular purpose. Without limiting the foregoing, in no event will Altegris, ITR, their affiliates or employees have any liability in connection with the use by any person of the information or data presented in this website.