Why Managed Futures: Diversification. Liquidity. Transparency.
Managed Futures refers to an asset class offered by professional money managers who are known as Commodity Trading Advisors (CTAs). CTAs are required to register with the U.S. government’s Commodity Futures Trading Commission (CFTC) through the National Futures Association (NFA), before they can offer themselves to the public as money managers. Commodity Trading Advisors are also required to go through an FBI deep background check, and provide comprehensive disclosure documents, which are required to be updated on a strict periodic basis and reviewed by the NFA before investment services can be offered.
There are several reasons why a well informed and properly capitalized investor may consider including Managed Futures in a diversified portfolio.
Managed Futures differ from most other alternative investments because it offers transparency in marked to the market exchange traded contracts. The typical fears that might prevent many investors from allocating to alternative investments, such as non transparent asset pricing, lockups, and gates to exit which might depend on other investors, do not apply to managed futures separately managed accounts. Rather, similar to the stock market, managed futures offer price certainty and liquidity because futures are traded on a regulated exchange. Where as many other alternative investments are not priced to the market and are not able to be sold in short order, managed futures are priced continuously to the market on an open and regulated exchange. In addition, with separately managed accounts, (i.e. not a fund product) the account is your own so there are no gates to exit at the fund level, and you are only subject to the market liquidity. While some CTAs do trade low volume futures, most stick to actively traded products. Not only are the products that CTAs trade regulated, but the CTAs and the clearing firms are also regulated. As an investor in Managed Futures, you will be provided daily statements of account activity and balances which show the value of the products traded marked to the market.
CTAs can take advantage of a wide range of diversification opportunities beyond the traditional investments of stocks and bonds. This diversification potential can manifest itself with exposure to a wide range of asset classes including, but not limited to, currencies, metals, interest rates, and agricultural commodities. A Managed Futures program can also invest in markets and exchanges around the world.
There are risks involved with investing regardless of who is making the trading decisions. We invite you to give us a call and speak with one of our brokerage professionals. They will discuss your particular needs and risk tolerances and help create customized and comprehensive performance reports for review. For more information Contact FuturePath Trading