Guide to Becoming a Commodity Trading Advisor Being a CTA and managing other people’s money is a business and should be treated as such. You have to think about it as any new business venture. Take the time to write a comprehensive business plan. Take an inventory of your strengths, your weaknesses, resources and skills. It’s important to be honest with yourself and with your potential clients. If there is a deficiency somewhere, find a way to address it.read more The Benefits of Managed Futures: 2006 Update Various managed futures return (e.g. CTAs) opportunities stem from the expanded universe of

securities available to trade and the strategies that can be employed. Funds can access both

financial and non-financial (commodity) markets and can easily take long or short futures and

option positions in any of these markets. Expanding the set of investment opportunities results in

providing diversification benefits to a portfolio that cannot be replicated through traditional stock

and bond investment strategies.read more Managed Futures and Hedge Funds: A Match Made in Heaven In this paper we study the possible role of managed futures in portfolios of stocks, bonds and hedge funds. We find that allocating to managed futures allow investors to achieve a very substantial degree of overall risk reduction at limited costs. Apart from their lower expected return, managed futures appear to be more effective diversifiers than hedge funds. Adding managed futures to a portfolio of stocks and bonds will reduce that portfolios standard deviation more and quicker than hedge funds will, and without the undesirable side-effects on skewness and kurtosis. Overall portfolio standard deviation can be reduced further by combining both hedge funds and managed futures with stocks and bonds. As long as at least 45-50% of the alternatives allocation is allocated to managed futures, this again will not have any negative side-effects on skewness and kurtosis.read more Portfolio Diversification Opportunities Investment management professionals have been using managed futures for more than 30 years.

More recently, institutional investors such as corporate and public pension funds, endowments and

trusts, and banks have made managed futures part of a well-diversified portfolio. In 2004, it was

estimated that over $130 billion was under management by trading advisors.read more Facts and Fantasies about Commodity Futures We construct an equally-weighted index of commodity futures monthly returns over the period between July of 1959 and December of 2004 in order to study simple properties of commodity futures as an asset class. Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities. While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns. The negative correlation between commodity futures and the other asset classes is due, in significant part, to different behavior over the business cycle. In addition, commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation.read more On the Performance of Alternative Investments: CTAs, Hedge Funds, and Funds-of-Funds In this paper, we study alternative investment vehicles such as hedge funds, funds-of-funds, and commodity trading advisors (CTAs) by investigating their performance, risk, and fund characteristics. Differing from the previous studies that pool these investment vehicles, we consider them as three distinctive investment classes. We study them not only on a stand-alone basis but also on a portfolio basis. We find several interesting results. First, CTAs differ from hedge funds and funds-of-funds in terms of trading strategies, attrition rates and survivorship bias, liquidities, and correlation structures in different market environments. However, funds-of-funds are similar to hedge funds in these dimensions. Second, during the period of 1994 to 2001, hedge funds outperform funds-of-funds, which in turn outperform CTAs on a stand-alone basis. These results can be explained by the double fee structure but not survivorship bias. Third, correlation structures for alternative investment vehicles are different under different market conditions. Hedge funds are highly correlated to each other and are not well hedged in the down markets with liquidity squeeze. The negative correlations with other instruments make CTAs suitable hedging instruments for insuring downside risk. When adding CTAs to the hedge fund portfolio or the fund-of-fund portfolio, investors can benefit significantly from the risk-return trade-off.read more Commodities- Active Strategies for Enhanced Returns In this article, we note how a set of active commodity strategies could potentially add

value to an investor’s commodity allocation. But we also emphasize the due care that

must be taken in risk management and implementation discipline, given the “violence of

the fluctuations which normally affect the prices of many … commodities,” as Keynes

(1934) put it.read more Managed Futures And Varying Correlations Managed futures (or CTAs) is an alternative investment strategy characterised by its ability

to take either long or short positions efficiently in a wide variety of global markets; by

historically low correlations to both traditional and other alternative investment strategies;

and by the potential to provide portfolio diversification.read more A Quantitative Analysis of CTA Funds Our research studies various properties of commodity trading advisors (CTAs) from a quantitative point of view. Our investigation is based on a commercial database of 549 funds and focuses on the period 1990 to present.Firstly, CTAs return distributions are analyzed and strong evidence of non-normality is found, stressing the need for portfolio allocation techniques which take into account higher-order moments.read more Managed Futures and Long Volatility The buyer of an option straddle pays the implied volatility to get exposure to realized volatility during the

lifetime of the option straddle. Fung and Hsieh (1997b) found that the return of trend following strategies

show option like characteristics, because the returns tend to be large and positive during the best and

worst performing months of the world equity markets.read more