Managed Futures

Managed Futures are professionally managed and traded accounts using investor funds, traded in the futures and options markets. These professional account managers or traders are known as Commodity Trading Advisors (CTAs). They invest on both the long and short side of the market and usually employ quantitative or technical analysis and systematic investment processes.

These accounts will either trade in a broad array of commodities, or in just the one or two which the CTA feels most comfortable with in regards to their trading methods.  A client will be able to see each and every trade that goes into their account, and can very easily follow along to better understand what the trader is doing when they buy and sell positions.

Each individual CTA must also have a disclosure document, which can give you a month-by-month snapshot of the program’s history.  This transparency, along with the retail investor’s endless search for non-correlated alternatives to the equity market, are what many believe have contributed to the incredible rise in the amount of money which has been placed in Managed Futures, making Managed Futures a diverse investment option to consider.

Managed Futures accounts are very liquid and can be funded with cash, or through a Self Directed IRA or 401K. When using retirement funds investors should be reminded there is a substantial risk of loss and should use conservative programs and not put your entire retirement fund into a single investment.

In assessing a Managed Futures program, we look at a number of different aspects.  First we like to see enough of a track record to see how the CTA performs in different market conditions.  Since drawdowns (losses) are inevitable, it is important that the CTA not only keeps the drawdown manageable, but also recovers from past drawdowns in a reasonable and timely fashion.

The individual programs Margin-to-Equity Ratios (M/E%) should also be considered, and be in line with the different markets which are being traded.  We also prefer to use CTAs which do not charge fees for closing an account or switching into different programs.

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