Investing in Managed Futures

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The globalization of financial markets has made portfolio diversification and managing risk more important than ever. Futures contracts such as stock indices, debt instruments, currencies, energies, metals, and agricultural commodities offer an effective separate asset class to diversify an investor’s traditional securities and bonds portfolio. Investors seeking a sophisticated method of portfolio diversification now commonly defer their trading decisions to an experienced commodity trading advisor.

The benefits of managed futures within a well-balanced overall investment portfolio include¹:

1. Source: CME Group “Managed Futures: Portfolio Diversification Opportunities”

Managed Futures Performance Comparison

Based on a period from 1/82 to 6/15. 1) Managed Futures: Stark 300 CTA Index; 2) U.S. Stocks: S&P 500 Total Return Index; 3) International Stocks: MSCI World Index. Source: Stark & Company.

Portfolios… including judicious investments… in leveraged managed futures accounts show substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds) alone.

– Dr. John Lintner, Harvard University

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Download Managed Futures Brochures

• Managed Futures: Portfolio Diversification Opportunities – Learn how you can enhance returns and lower overall volatility with this informative brochure from the CME Group. Download Now
• 10 Reasons to Consider Adding Managed Futures to Your Portfolio – This concise brochure from CME Group demonstrates 10 compelling reasons you should consider managed futures. Download Now
• Frequently Asked Questions About Managed Futures – Expand your knowledge about Managed Futures, your questions answered with this helpful brochure from the CME group. Download Now

Download Managed Futures Whitepapers

• Lintner Revisited: The Benefits of Managed Futures 25 Years Later – Dr. John Lintner, a Harvard Professor, presented the seminal paper entitled “The Potential Role of Managed Commodity – Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds” at the annual conference of the Financial Analysts Federation in Toronto in May 1983. The findings of his work, namely that portfolios of equities and fixed income exhibit substantially less variance at every possible level of expected return when combined with managed futures, remain as true as ever more than 25 years later. In this brief paper, the authors attempt to update Professor Lintner’s work by demonstrating that the beneficial correlative properties of managed futures presented in his research persist today. They also reintroduce managed futures as a diverse collection of liquid, transparent hedge fund strategies that tend to perform well in environments that are often difficult for traditional and other alternative investments. Download Now
• Lintner Revisited: A Quantitative Analysis of Managed Futures in an Institutional Portfolio – Managed futures comprise a wide array of liquid, transparent alpha strategies which offer institutional investors a number of benefits. These include cash efficiency, intuitive risk management, and a proclivity toward strong performance in market environments that tend to be difficult for other investments. This paper revisits Dr. John Lintner’s classic 1983 paper, “The Potential Role of Managed Commodity-Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds,” which explored the substantial diversification benefits that accrue when managed futures are added to institutional portfolios. As Dr. Lintner did, it analyzes the portfolio benefits that managed futures offer through the mean-variance framework, but it draws on more complete techniques such as the analysis of omega functions to assess portfolio contribution. The paper also conducts a comparative qualitative and quantitative analysis of the risk and return opportunities of managed futures relative to other investments, and includes a discussion as to why managed futures strategies tend to perform well in conditions that are not conducive to other investment strategies. It provides an overview of the diversity of investment styles within managed futures, dispelling the commonly held notion that all CTAs employ trend following strategies. Finally, it highlights the opportunities the space offers to institutional investors seeking to create well-diversified, liquid, transparent, alpha portfolios. Download Now

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