They’re finally starting to get it…

Most of the time, when we see managed futures mentioned by the mainstream press, we find ourselves shaking our heads at the botched application of industry terminology or gross misunderstanding of the asset class as a whole. In other (far too frequent) cases, we end up having to restrain ourselves from attempting to verbally eviscerate poorly informed or deliberately misleading authors. So when our perusal of managed futures coverage this morning uncovered a positive mention of managed futures that wasn’t a piece of marketing material and demonstrated institutional understanding of the diversification value managed futures offers… well, it was early, so we basically assumed we were still asleep and dreaming.

The article, entitled “Morgan Stanley Smith Barney Takes Risk Off, Shifts to Safe Havens,” explained the impetus for a recent asset class allocation shift, including taking an “overweight” position in managed futures, as such:

Calling the odds of a recession in the U.S. and beyond “uncomfortably high,” Morgan Stanley Smith Barney says it has shifted to an overweight position in safe haven assets and is underweighting risk assets. The change is “the most significant change to our tactical asset allocation in more than two years,” Morgan Stanley Smith Barney’s Chief Investment Officer Jeff Applegate and two colleagues wrote in a November markets report.

Yep- you read that correctly. They put managed futures in the “safe haven” category. But it gets better. We read through the portion of the report in question, and were quite pleased to see the folks at Morgan Stanley Smith Barney hitting the nail on the head:

As an asset class, managed futures have low historical correlations to other asset classes, providing a considerable degree of portfolio diversification. We believe good risk management begins with portfolio diversification, but it doesn’t have to end there. Because managed futures have historically performed well during periods of adverse equity markets, we are adopting a tactical overweight allocation.

Now, in the spirit of fairness, let’s put a few caveats in here. For one, just because the asset class is being classified as “risk off” and a “safe haven” in both the article and report does not mean that managed futures doesn’t present risk. Futures trading is complex, and large losses are a possibility. As the report clarifies, the value in the overweight allocation relates to noncorrelation to traditional asset classes. Moreover, while we have often discussed the crisis performance of managed futures ourselves, it’s also important to remember that past performance is not necessarily indicative of future results.

That being said, is it a little too optimistic to wonder/hope that people are finally starting to get it?


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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.