Managed Futures (8 reasons to use them)

Discussion in 'Educational Resources' started by Rakia, Jan 4, 2011.

  1. Rakia

    Rakia

    Managed Futures is an industry that is included of specialize money managers widely known as Commodity Trading Advisors (CTA’s) that manages funds on behalf of their customers. They are frequently investing in the multinational futures markets such as currencies, interest rate, equity, metal, energy and agricultural markets. They are obligated to register with the Commodity Futures Trading Commission (CFTC), a federal government agency and are Members of the National Futures Association (NFA), a self-regulatory organization authorized by Congress in 1982.

    Eight factors why one should invest in managed futures.

    At Rakia Futures, we deem that every investment choice should be diligently considered in light of one’s financial circumstances and resources.

    (1) Managed futures have often surpassed alternatives. Empirical indication indicates that using managed futures as a means of diversification or speculation implies potentially improved risk-adjusted rewards for any investment portfolio. Relationship amongst stocks and commodities is almost nil, so commodity futures have often underwent positive performance during times when the US stock market was anemic. Enhanced knowledge of the benefits of managed futures hastened in a more than a tripling of funds under management from $37.9 billion in 2000 to $213 billion in Q4 2009 (Source: Barclay Group, LTD). Numerous forecasters agree that expanding into futures improves total performance of portfolios, principally if it is in the hands of an qualified specialist.


    (2) Insignificant or negative association leads to increase risk-versus-reward ratios. Diversification affords long-run return when one allocates a section of their funds to a reduced amount of negatively linked markets with comparable potentials for return. Managed futures exemplify potential hedges against such factors as inflation risk and business cycle changes which may unfavorably affect a absolute stock/bond portfolio.

    (3) Percentage-based costs denote CTAs mainly target consistent returns. Commodity Trading Advisors (CTAs) typically have percentage-based gains as their major source of income. Since incentive fees mean CTAs earn more money when you do, they have incentives to get as much return as viable for their investors.

    (4) Commodity portfolios make diversification easy. CTAs repeatedly target many markets using numerous guidelines, which reduces your volatility risk. Not every investor has the capacity to look at a computer screen all day for this single objective. Managed futures provide every investor the option to diversify by means of professional managers.

    (5)Versatility means not being a bull or a bear. Managed futures programs are not the equivalent as mutual funds: CTAs are not bound to only buying. They can buy and sell futures, write or purchase options, and speculate in bullish or bearish markets.

    (6) The prospect for global market exposure is basic. By their very nature, commodities are markets reliant upon worldwide factors. Furthermore, foreign exchange and index futures permit for global diversification not including the need for a microscope on several thousand foreign stocks and bonds.

    (7) You have the power to choose. There are many CTAs out there and they all covet your business. That not only means that you can be selective about risks and rewards, but also about capital preconditions and fees/costs. You have choices so find what works for you.

    (8) CTAs have record. The managed futures business has existed for several decades and the most consistent CTAs are the ones who have a long-term track record.