The ATM Syndrome There were more than 1.5 million Automated Teller Machines worldwide as of 2006, according to Wikipedia. Commodity trading advisors could be added to that number. As highly liquid money managers, theyâve been meeting investorsâ need for cash amid the credit contraction. People are getting cash where they can while waiting for the hedge funds that froze withdrawals to reopen the gates. As a result, certain managed futures funds with extremely strong performance had big redemptions that dwarfed capital inflows. Whatâs going on with investors? I asked our editorial advisor Tim Merryman, who not only talks with people in the know but looks at a lot of data and is a CTA himself. Tim has a hypothesis. In recent years pensions and other investors tried to diversify their portfolios with long-only commodity allocations. But in the fourth quarter of 2008, commodities went down together with other markets. It happened in a few months, too fast for institutions to rethink the concept of long-only commodities as a hedge, consider long/short futures managers as an obvious alternative and change their allocations. In the extreme turmoil, investors no longer looked for a hedge, just for cash. Hence the ATM syndrome. âMarkets went to hell in a hand basket so quickly that people did not get around to hedging,â Tim says. âAllocators donât like the idea of catching a falling knife. Why hedge a position when you think itâs going down further? People prefer to go to cash and wait it out.â A rally in stocks could ease the strain on portfolios and change investorsâ calculus. âSome allocators may feel slightly more comfortable hedging with managed futures at this point,â says Tim. Source : http://www.opalesque.com/Future_Intelligence/OFI24Mar2009.pfd