INVESTORS

The stock market, over the last 20 years, has seen several large downswings which, if an investor was only invested in the stock market, could have destroyed years of returns. As such, investors must find other ways to potentially profit during the potential downswings. At RCG Managed Futures, we offer access to a wide set of Commodity Trading Advisors (CTAs) to help investors gain exposure to products that are not necessarily correlated to the stock market, such as agricultural products, metals, stock indices ( where you can short the market) and others, to possibly help weather the storm. The Managed Futures team highlights approximately over 30 different CTA programs and offers access to a full database of over 500 CTAs (which may be able to be cleared at RCG) with a large variety of trading styles that include discretionary trading, technical trading, trend following, counter-trend, day trading, spreads, and option strategies. Investors can use RCG’s CTA database to help find CTAs to choose from for their wealth management needs.

DIVERSIFY BEYOND THE TRADITIONAL ASSET CLASSES OF STOCKS/BONDS/CASH

One of the biggest advantages of managed futures is their potential independence from other markets such as equities, bonds and cash. Some of the CTAs that we highlight and offer have a low correlation to one of the most common benchmarks, the S&P 500, with some CTAs having less than 0.1 correlation, and we also offer other CTAs that are negatively correlated. Since there is a possibility of little or no correlation to the S&P 500, the returns of the managed futures allocation in the portfolio will not necessarily follow the returns of the stock market allocation of the portfolio. Studies have shown that a small allocation (10-20%) to managed futures compared to a portfolio normally split evenly between fixed income and stocks can not only offer the chance for better returns, but also possibly lower volatility.

The Barclay CTA Index measures the composite performance of CTAs that have been trading for four years or more, and are registered with Barclay Hedge. The CTAs that comprise this index change over time. This index is not necessarily an indication of how the CTA(s) you select will perform. Although the Barclay CTA index is not indicative of all managed futures accounts, as depicted in the below chart, , the Barclays CTA index has periods where it outperformed the Dow Jones Industrial Average Index, The Russell 2000 Index and the S&P Total Return Index.
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  1. The Barclay CTA Index measures the composite performance of CTAs that have been trading for four years or more, and are registered with Barclay Hedge. The CTAs that comprise this index change over time. This index is not necessarily an indication of how the CTA(s) you select will perform.
  2. The Dow Jones Industrial Average reflects the performance of the Dow Jones Industrial Average, a price weighted average of 30 blue-chip U.S. stocks that are generally the leaders in their industry and are listed on the NYSE
  3. The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 11% of the Russell 3000 total market capitalization. The index was developed with a base value of 135.00 as of December 31, 1986.
  4. The S&P 500 is an index made up of 500 blue chip stocks. The index is commonly used to measure stock market performance.

The below chart illustrates that adding managed futures (as represented by the Barclay CTA Index) to a traditional portfolio of stocks and bonds (as reflected by the respective indexes) improves the overall investment quality of the portfolio. As you can see from the below chart, the portfolio with the greatest return, and the least volatility, includes exposure to futures. Please note, the below chart is reflective of index performances which does not necessarily depict an individual investor’s portfolio, and therefore the performance of your account may not be reflected as below. In addition, The CTAs that comprise the Barclay Hedge CTA index change over time. This index is not necessarily an indication of how the CTA(s) you select will perform.
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  1. The S&P 500 is an index made up of 500 blue chip stocks. The index is commonly used to measure stock market performance.
  2. The Barclays Capital Long Term Treasury Index- Total Return (formally the Lehman Brothers Long-Term Treasury Index ) us an index of U.S. Treasury bonds,  which includes interest income and appreciation.  Prior to 1981 the Salomon Brothers’ Investment Grade Bond Index was used. All legacy Lehman Brothers benchmark indices were rebranded as Barclays Capital Indices in November 2008.
  3. The Barclay CTA Index measures the composite performance of CTAs that have been trading for four years or more, and are registered with Barclay Hedge. The CTAs that comprise this index change over time. This index is not necessarily an indication of how the CTA(s) you select will perform.

TRANSPARENCY YOU CAN SEE

Managed Futures differ from most other alternative investments because it offers transparency and marked to the market exchange traded contracts. The typical fears that might prevent many investors from allocating to alternative investments, such as non transparent asset pricing, lockups, and gates to exit which might depend on other investors, do not apply to managed futures separately managed accounts. Rather, similar to the stock market, managed futures offer price certainty and liquidity because futures are traded on a regulated exchange. Where as many other alternative investments are not priced to the market and are not able to be sold in short order, managed futures are priced continuously to the market on an open and regulated exchange. In addition, with separately managed accounts, (i.e. not a fund product) the account is your own so there are no gates to exit at the fund level, and you are only subject to the market liquidity. While some CTAs do trade low volume futures, most stick to actively traded products. Not only are the products that CTAs trade regulated, but the CTAs and the clearing firms are also regulated. As an FCM, Rosenthal Collins Group will provide daily statements of the customer’s account activity and balances which show the value of the products traded marked to the market.

THE COMMODITY TRADING ADVISOR TRADES THE ACCOUNT FOR YOU

A managed futures account can provide the investor exposure to the futures markets without the investor necessarily needing the skills to be a successful trader. The CTAs are professional traders who, through part of their fees, (called an incentive fee) make their money when the investor makes money in the market; therefore, just like you, the CTA has an incentive to have the account positively perform. In addition, the CTA also can make money on a management fee which is not tied to performance.

For more information, please contact us.