Benefits of Managed Futures

Reduced Portfolio Volatility Risk: The primary benefit of adding a managed futures component to a diversified investment portfolio is that it might decrease portfolio volatility risk. This risk-reduction contribution to the portfolio is possible because of the low- to slightly negative correlation of managed futures with equities and bonds. One of the key tenets of Modern Portfolio Theory, as developed by the Nobel Prize economist Dr. Harry M. Markowitz, is that more efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations.

Potential for Enhanced Portfolio Returns: While managed futures can decrease portfolio risk, they can also simultaneously enhance overall portfolio performance. This is substantiated by an extensive bank of academic research, beginning with the landmark study of Dr. John Lintner of Harvard University, in which he wrote that the combined portfolios of stocks (or stocks and bonds) after 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. Viewed as an independent investment, managed futures have compared favorably with U.S. stocks and bonds for decades.

Ability to Profit in Any Economic Environment: Commodity Trading Advisors can take advantage of price trends in any type of economic environment. They can buy futures positions in anticipation of a rising market or sell futures positions if they anticipate a falling market. For example, during periods of inflation, physical commodities such as gold, silver, oil, grains and livestock tend to do well, as do the major world currencies. During deflationary times, futures provide an opportunity to profit by selling into a declining market with the expectation of buying, or closing out the position, at a lower price. CTAs can even use strategies employing options on futures contracts that allow for profit potential in flat or neutral markets.

Barclay CTA Index

The Barclay CTA Index is a leading industry benchmark of representative performance of commodity trading advisors. There are currently 551 programs included in the calculation of the Barclay CTA Index for 2014. The Index is equally weighted and rebalanced at the beginning of each year. For more information, visit the Barclay Hedge website .