Managed futures is defined as an organization composed of commodity trading advisors that provide financial management of client assets using a unique trading system that involves discretion trading of short or long term future contracts in various commodities such as metal, grains and equity.
Among the many inferences that provide insight into managed futures trading is their capacity to lower a client’s portfolio risk. This argument is supported by several studies on the long term effects of combined traditional asset management with alternative investment like futures trading.
If you plan to invest your assets with a private financial manager take these things into consideration: You need to prepare by creating an important assessment about disclosure documents as well as trading plans and fees to make sure you know what you’re getting into.
Ask your CTA about the kind of trading protocol that he follows. Generally there are two types of trading practice in the CTA community. Some traders are trend followers while others are made up of neutral traders which include options writers.
Trend following makes use of proprietary fundamental trading processes that give signals when it’s right to go with short or long term futures trends in the market. Market Neutrals look for profit through commodity spreading and non predictive trading principles.
With your preference of CTA, an important factor to consider is the disclosure documentation. Make sure that you pick a CA with the maximum peak-to-valley correlation. This will provide an insight into the CTA’s largest decline in equity or account.
This will give you a window into evaluating the risk involved with the CTA’s previous performance. Always remember that knowledge is power. Being informed will help you pick the right CTA and ensure that your investment portfolio is in good hands.
Arming yourself with a lot of information never hurt. Take into consideration that this is your hard earned money, so take the necessary steps to enhance risk adjusted returns. With the right program and CTA, Managed futures will do this for you.
