We finally got the Dow Jones/Credit Suisse Hedge Index data from December, enabling us to update the asset class scoreboard for all of 2010. The results are as follows…Â [past performance is not necessarily indicative of future results]
Key: Managed Futures = Dow Jones Credit Suisse CTA Index, Cash = 3 mo T-Bill rate, Bonds = Vanguard Total Bond Market ETF, Hedge Funds = Dow Jones Credit Suisse Hedge Index, Commodities â€“ ishares GSCI ETF, Real Estate = ishares Dow Jones US Real Estate ETF, World Stocks = MCSI World Index (ex USA), US Stocks = S&P 500 Index
You can see that Managed Futures more than held their own despite their own struggles in 2010, beating out hedge funds, world stocks, bonds, and (surprisingly) commodities. Â But how was real estate up for the year, and commodities down, you may be asking…. Wasn’t Palladium up 95%, and Sugar up 92%. And don’t we keep hearing on the news how real estate remains in a deep funk?
The answer to those questions is in the tracking mechanism we’re using for commodities and real estate. For commodities, we’re using the ishares GSCI ETF, which tracks the Goldman Sachs Commodity Index. Â The problems with long only commodity indices has been well documented, and this ETF is no exception to those issues (Read our past newsletter:Â Are commodity ETFs bad for managed futures? for more). Â Further, the GSCI is heavily weighted in energy markets (78%) - Â with nearly 40% in Crude Oil, which did very little for the year;Â has no exposure to Palladium and Sugar; and has very little exposure to the other high fliers of the year (Wheat = 3%, Silver = 0.3%) [GSCI fact sheet]
As for real estate, the ETF we use a a proxy for performance there tracks the stock market value of several publicly traded REITs specializing in US real estate. Â With stock markets forward looking, these stock prices have appreciated faster than the real estate underlying them, especially residential - which continues to make new lows per the Case Shiller index. Suffice it to say this number should be taken with a grain of salt, although it is investable.
Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.
The entries on this blog are intended to further subscribers understanding, education, and â€“ at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex.Â Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts.
The mention of asset class performance is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.) , and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices:Â such as survivorship and self reporting biases, and instant history.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the clientâ€™s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
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