The term “managed futures” represents an industry comprised of professional money managers known as commodity trading advisors (CTAs) who manage client assets on a discretionary basis, using global futures and options markets as an investment medium.
However, for managed futures to grow as an investment alternative, individuals need to increase their knowledge and comfort level as to the use of managed futures in their investment portfolios.
Exactly, what are the benefits of managed futures as part of an investor’s overall asset portfolio? Basically, managed futures provide direct exposure to international financial and non-financial asset sectors while offering (through their ability to easily take both long and short investment positions) a means to gain exposure to risk and return patterns not easily accessible with investment in traditional stock and bond portfolios.
Investors must come to appreciate that the investment benefits in managed futures are well founded in financial theory and empirical evidence. While it is impossible in a short synopsis to convey all the details of the benefits of managed futures, the following exhibits support managed futures as a means to:
reduce portfolio volatility risk,
enhance portfolio returns in economic environments in which traditional stock and bond investment media offer limited opportunities, and
participate in a wide variety of new financial products and markets not available in traditional investment products.