Our newsletter for the week is out, and this time we’re taking a closer look at the CTAs who stick to the roots of the futures industry. With the majority of U.S. farmland located hundreds to thousands of miles away from Wall Street, it is easy to see how the sheer size of the agriculture sector and its impact on the U.S. economy gets overlooked when discussing the American financial machine. Likewise, most discussions related to managed futures revolve around the systematic trend following CTAs, and rarely their lesser known cousins â€“ Agriculture-focused Commodity Trading Advisors, or as we refer to them in our office, Ag Traders.
Just what is an Ag Trader? They focus on the markets which birthed the futures trade, like Corn, Wheat, Soybeans, Soybean Oil, Hogs, and Cattle. Let the Wintons and Transtrends of the world have their fancy algorithms crunching data on financial futures â€“ Ag Traders want to drive to a farm and stick their hand in the dirt to see what the crop is likely to do.
Now, Ag traders have long held a smaller role in the managed futures portfolio, usually being too small in terms of capacity and staff; and too loose in how and why certain trades are put on to be attractive to large institutional investors. But the recent grain-rallying drought in the U.S. following a similar one in Russia in 2010, and the resulting good performance of Ag Traders during those times (while traditional managed futures programs have mostly struggled) has put the light squarely on these frequently overlooked options. With that enhanced attention has come a slew of inquiries, and we decided it was probably time to take a much deeper look at the Ag Trading strategy within managed futures, breaking down what they look like, what they do, and why you might want to consider an allocation in your current portfolio. Click here to see the full breakdown.
- - - - - -
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.