Alternative Investment Providing Diversification Beyond Traditional Asset Classes of Stocks and Bonds.
Managed Futures are considered an alternative investment to stocks and bonds. Alternative investments represent an asset class that has the potential to provide returns that are uncorrelated to the stock and bond market. When added to a traditional portfolio of stocks and bonds, alternative investments have the potential to increase returns while also reducing risk of the overall portfolio.
PROFESSIONAL MONEY MANAGERS / COMMODITY TRADING ADVISORS
Managed Futures accounts are controlled by professional money managers known as Commodity Trading Advisors (CTAs). A managed futures account is like any other brokerage account established to trade in futures, except that the responsibility for determining what trades to make, and at what time, is delegated to the CTA. In the United States, CTAs trading futures are members of the National Futures Association (NFA) and are registered with the Commodity Futures Trading Commission (CFTC).
GROWTH OF THE MANAGED FUTURES INDUSTRY
Since the 1980’s, the managed futures industry, historically, had been enjoying steady growth. In 2004, when the investment community discovered the many advantages offered by managed futures, the industry exponentially grew. The charts below shows that money under management in the managed futures industry had more than doubled from 2004 to 2010, rising from 131 billion to over 267 billion and by the end of 2016 had 339.7 billion in assets under management.
- Diversity beyond traditional asset classes of stocks and bonds
- Offers liquidity of investments; no gates to exit
- futures markets are transparent in their pricing as these are exchange traded contracts
- Access to diverse markets such as metals, agricultural products, and financial instruments
- Potential to increase returns while also potentially reducing volatility
- Managed Futures may perform well when other investments such as stocks are performing poorly
- Managed Futures are attractive as a stand alone investment and can provide an opportunity for greater returns than the S&P 500 Index
- Trading decisions are made by a professional CTA
- Ability to profit in a rising or falling market
- Ability to invest tax deferred funds through a self directed individual retirement account (IRA)