The Managed Futures industry is comprised of professional money managers known as Commodity Trading Advisors (CTAs), and/or Commodity Pool Operators (CPOs) that manage client assets utilizing a variety of global financial and commodity futures markets and related products. Over the past 20 years, the industry has seen assets under management increase from under $1 billion to an estimated $329.6 billion at the end of the 4th quarter of 2012.*
Managed Futures are often viewed as an “Alternative Investment” or one of a number of trading/investment strategies listed under the heading of “Hedge Funds.” The industry has seen tremendous growth in recent years as investors recognize the potential for Managed Futures to diversify not only traditional portfolios containing stocks and bonds, but portfolios including a mix of other Hedge Funds. This diversification results from Managed Futures historical lack of correlation to global equity and fixed income markets. In other words, Managed Futures performance tends to be independent of, and unrelated to, factors that influence stock and bond performance.
The links below offer further information regarding futures markets and the Managed Futures industry.
*According to “Barclay Hedge, Ltd.“
What Are Managed Futures?
By: Glenn Curtis
Managed futures are futures positions entered into by professional money managers, known as commodity trading advisors, on behalf of investors. Managers invest in energy, agriculture and currency markets (among others) using futures contracts and determine their positions based on expected profit potential.
A futures contract is a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange.
The potential benefits of managed futures are that these alternative investments may help diversify one’s portfolio and, under some conditions, minimize risk. For example, investing in currencies abroad may mitigate domestic risk. Managed futures may also help the individual to profit or minimize risk during periods of slow economic growth.
What are alternative investments?
Alternative investments are investments considered outside of the traditional asset classes of stocks, bonds and cash. Examples of alternative investments include real estate, commodities, options and financial derivatives. Alternative investments are often used by commodity trading advisors and hedge funds.
National Futures Association (www.nfa.futures.org)
Article Link: Opportunity and Risk: An Educational Guide to Trading Futures and Options on Futures.
Chicago Mercantile Exchange (www.cme.com)
Article Link: Managed Futures Resources Center
Article Link: Why Managed Futures
Article Link: Lintner Revisited: The Benefits of Managed Futures 25 Years Later
THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.