Managed Futures: The Potential Benefits of a Short and Long term Perspective

Like most other asset classes, managed futures performance is cyclical, and should be viewed in the context of overall investment performance across asset classes over both short and long time horizons. Although managed futures have not worked all the time, they may offer the potential to work over time.

Managed Futures and CTAs: A Smorgasbord

Historically, over the last thirty-five or so years, the managed futures asset class has become synonymous with systematic trend-following CTA programs that actively trade futures or forward contracts. It is important to understand that not all futures-trading strategies fall under the managed futures umbrella as conventionally defined, and that even some well-known research and ratings agencies have on occasion ended up misclassifying some funds and strategies as managed futures.

Allocating to “Liquid Alternatives”

An investor should not expect to be compensated for taking on diversifiable risk, only for systematic or market risk. A useful analogy is that of a fire-fighter who willingly leaves his protective gear behind to enter a burning house and then expects to be paid more because he took on greater risk. But the risk he took was unnecessary and avoidable.