A Quantitative Analysis of Managed Futures Strategies

The Managed Futures industry is a diverse collection of active trading strategies which specialize in liquid, transparent, exchange-traded futures markets and deep foreign exchange markets. Some of the approaches taken by managed futures managers exploit the sustained capital flows across asset classes that typically take place as markets move back into equilibrium after prolonged imbalances. Others thrive on the volatility and choppy price action which tend to accompany these flows.

This paper endeavors to re-introduce managed futures as a liquid, transparent hedge fund sub-style which actively trades a diversified mix of global futures markets. We seek to dispel some of the more common misconceptions many institutional investors hold regarding the space. We discuss the likely effects and implications of the proliferation of futures markets and managed futures assets under management on the performance and capacity of trading managers.

The objectives of this paper are not at all modest. We seek to furnish a modern-day Lintner paper, and also to dispel some common misconceptions regarding managed futures. While Lintner’s study has been applauded by scholars and practitioners who have read it, there still seems to be a gap and disconnect between many institutional investors and the managed futures space. Is this because through the passage of time the kernel of Lintner’s findings is no longer true? Or have some institutional investors simply not performed their fiduciary duty in a comprehensive manner?

Managed Futures Growth in Assets Under Management (1980-2016)

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