In managed futures, people like to tout exposure to commodities. Now, at least one firm is betting that excluding all commodities could be the recipe for success. InvestmentNews reports:
By leaving commodities out of the SSgA SSARIS Managed Futures fund altogether, the fund should have even lower volatility, according to SSgA. In a prospectus filed with the Securities and Exchange Commission last Friday, the company also said it would be targeting futures contracts with low daily standard deviation. Marie McGehee, a spokeswoman for SSgA, declined to comment on the filing.
The downside of leaving out commodities could be lower returns. While commodities tend to have the highest volatility, they’re also a potential source of big returns for managed-futures funds, which basically are trend-following strategies.
It was that second paragraph that stuck out to us most. See, as an Introducing Broker that works with a wide variety of CTAs in the emerging space, we’ve been looking at the distinction between programs with hefty commodity exposure, and those that tend to stick to financials of some form. As it turns out, the idea of biasing exposure away from commodities is nothing new. In fact, this strategy has been embraced by some of the largest players in the industry. Take Winton, for instance:
They’re already gravitating away from the commodities that gave managed futures their name. In some ways, one might interpret this to mean that the “new” strategy isn’t that new at all, and may just come close to replicating titan performance. But even then… is that the kind of performance managed futures investors really want today? We took a look at the average negative and positive monthly returns for some of the most well-known CTAs out there, and here is what we found:
(Disclaimer: past performance is not necessarily indicative of future results.)
These guys may have the big names, but they certainly don’t have the same kind of big performance they made their names with anymore. For a mutual fund strategy, which, as we’ve written about in the past, will frequently cannibalize their own performance with excessive fees, such diminishing returns, in our opinion, are likely less than appealing. But, hey – best of luck.
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, 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.
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