Managed futures as an asset class is widely recognized as an important investment alternative that can potentially enhance the returns and lower the overall volatility of a portfolio.
Although futures investments involve substantial risk and are not suitable for everyone, the introduction of managed futures into an investment portfolio has the potential to reduce risk and enhance performance.
Seven Benefits of Managed Futures
- Potential for enhanced portfolio returns
- Liquidity facilitates easy entry and exit of market positions
- Transaction costs lower than those of comparable cash markets
- Opportunity for reduced portfolio risk
- Ability to be successful in any economic environment
- Opportunity to participate easily in global markets
- Potential tax benefits versus stocks
Futures and Portfolio Diversification
Many people view commodity futures as an asset class that is “too risky,” “too volatile,” “too difficult to understand” or “too complicated to manage.” While commodity futures are not for everyone, they may play an important part in a well diversified portfolio.
For those investors who are willing and able to bear the risks inherent in futures trading, a portion of their portfolios can be allocated to a program of managed futures. Managed futures are the oldest form of hedge funds. Commodity Trading Advisors are registered with National Futures Association and regulated by the Commodity Futures Trading Commision. The transparency of managed futures is unparalleled in the realm of alternative investments. Your manager’s decisions are fully reflected in your daily statement and are marked to the market every day. All the positions in your account are in liquid markets trading on regulated futures exchanges. If you don’t like what you see, you can liquidate your positions on a day’s notice. You can still lose money but at least you know what you have and what it is worth.