Managed Futures FAQ
What are alternative investments?
Alternative investments are investment products other than traditional asset types such as stocks, bonds, and cash. Because of their markedly different risk and return characteristics, alternative investments serve to stabilize and add diversification to traditional portfolios, while also potentially increasing long-term returns. There is a broad range of alternative investments, including:
- hedge funds
- managed futures
- foreign equities
- real estate
- derivatives contracts
What are managed futures?
Managed futures are a type of alternative investment traded by professional investment managers known as Commodity Trading Advisors (CTAs). While you can invest in futures on your own, these markets are highly complex. CTAs specialize in managing sophisticated strategies and portfolios of global futures contracts and options. In a managed futures account, a third-party custodian holds your money, but the CTA has full discretionary trading power—choosing when to purchase or sell various futures investments on your behalf.
What is the difference between managed futures and other alternative investments?
Most alternative investments—including hedge funds, fund of funds, private equity, venture capital funds, and oil and gas limited partnerships—lack transparency, liquidity, and regulatory oversight. In contrast, managed futures are transparent, highly liquid, and rigorously regulated by the National Futures Association and the Commodity Futures Trading Commission.
Why should investors include managed futures in their portfolios?
One of the main benefits of adding managed futures to a balanced portfolio is the potential to enhance overall portfolio returns and decrease portfolio volatility. Managed futures are a flexible investment option, as they broadly diversify across global markets.
Are managed futures a good short-term investment?
The PRICE Group does not recommend investing in managed futures as a short-term strategy. The futures markets tend to be cyclical, and as such, even the most skilled CTAs may experience periods of flat returns or drawdowns. But held over time, managed futures have the potential to generate solid returns, particularly because of their ability to perform in both bull and bear markets.