Smooth Volatility While Adding Diversification

Managed futures have a proven long term performance track record and can be an appealing investment proposition on a standalone basis. However, managed accounts really add value as a portfolio diversifier. When combined to a fund of hedge fund portfolio or to equities and bonds, managed futures substantially reduce downside deviation and worst drawdown, thereby smoothing the overall risk/return profile.

Managed Highlights

• Low correlation with stocks
• Buy or sell markets
• High liquidity
• Strong regulations
• Little counterparty risk
• Transparency and cash efficiency

Additionally, the futures industry is evolving as new technologies and trading approaches are continuously developed. This process is driven by continuous research and requires persistent investment in infrastructure and systems. As a result, it is creating clear economies of scale and constantly widening the gap between the largest and most established players and the rest of the industry while creating massive barriers to entry to new players.

An investor considering an allocation to managed futures should view them as a long-term investment, with a holding period of at least three to five years. A manager’s track record, reputation and experience should all be considered when selecting a CTA manager. Alternatively, investors can obtain a CTA allocation by investing into a "fund of fund" portfolio that includes managed futures.

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