What Are Managed Futures?
    Why Managed Futures?

The term “Managed Futures” describes an industry made up of professional money managers known as Commodity Trading Advisors (CTAs). These trading advisors manage client assets on a discretionary basis using global futures and options markets as an investment medium. These CTAs may render advice directly to the client or indirectly as advisors to commodity pools such as the Grant Park Futures Fund. The managed futures industry is over 26 years old and is estimated to have approximately $170 billion under management as of 2006. The industry has long been embraced by professional investment managers and more recently by institutional investors, including corporate and public pension plans, endowments and trusts, as well as financial institutions. Although there is a risk of losing your investment, academic studies have concluded that managed futures can enhance portfolio returns and reduce overall portfolio volatility as part of a well-balanced and diversified portfolio.

Growth in the Managed Futures Industry
January 1980 - December 2006

Why Managed Futures?

The benefits of Managed Futures within a well-balanced portfolio include the following:

• Opportunity for reduced portfolio volatility risk.
  
  
• Potential for enhanced portfolio returns.
  
  
• Although losses may occur with futures trading, the ability to profit in any market environment (inflationary, deflationary, rising, falling, etc).
  
  
• Opportunity to participate in over 80 markets worldwide.
  
  
• Low to negative correlations to traditional markets (stocks and bonds).

Adding managed futures to a traditional portfolio can improve the efficiency of an investor’s overall asset allocation and help to realize the benefits of diversification. This is substantiated by an extensive body of academic research, including the landmark study by Dr. John Lintner of Harvard University, in which he concluded 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."