We talk a lot about the diversification value of managed futures within an investment portfolio, because we think it’s important to view each piece of your portfolio in context. Each piece is a part of the investing machine, and the only way it works is when you see all the pieces working together. That being said, there’s another attraction to managed futures as an asset class, and that is performance. Past performance is not necessarily indicative of future results, but investors chasing returns will light up when looking at some of the double digit years that pepper managed futures indices history. These indices are an imperfect proxy for measuring the performance of the asset class, but their record can be alluring.
The problem for these investors is that they are often blinded by these years of double digit returns, and will overlook some of the more lackluster years, becoming frustrated when one of them pops up. They typically compare the performance of managed futures against the performance of the asset class they’re most familiar with â€“ stocks. When stocks outperform managed futures as they have for the past three years, the frustration escalates. Why invest in managed futures if you could have your money in stocks when they’re soaring?
The past three years aren’t exactly a ringing endorsement for managed futures, but the bigger picture tells a different story.
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. 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: 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 client’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.