Performance When Stocks Are Down
Futures-based investments are often viewed as higher return/ higher risk, but it is their non correlation with traditional markets which causes managed futures investments to be volatility reducers and portfolio diversifiers during the bad times for traditional investments.
Crisis Period Performance
...and When Stocks Are Up
Managed Futures non correlation to stock markets means there will be periods when stocks and managed futures both go up in tandem, and periods when they go down in tandem, as well as the periods where they move opposite one another. Taking a longer perspective shows that managed futures have can perform in a wide range of stock market environments, including positive performance during stock rallies.
Average Managed Futures Performance Based on Stocks
Past Performance is Not Necessarily Indicative of Future Results. Source: Attain Alternatives Blog showing (graph 1) the Credit Suisse Managed Futures Index performance during the worst peak to valley loss for the S&P 500 Total Return Index during the listed crisis periods, and (graph 2) the average performance of the SocGen CTA Index (y-axis) when the S&P 500 Total Return Index fell into the corresponding 12 month return windows (x-axis)
What Are Managed Futures?
Managed Futures are alternative investments which rely on professional investment managers known as Commodity Trading Advisors (CTAs), who specialize in trading exchange traded futures contracts both long and short in markets across the world.
Tactical Commodity Exposure
Managed Futures was one of the only asset classes to capitalize on Crude Oil’s heavy sell off in 2014/2015; and delivers true non correlated performance via accessing different return drivers in markets as diverse as Cotton and Japanese Bonds.
Past Performance is Not Necessarily Indicative of Future Results. The above shows the SocGen Trend Index versus the Spot price of Oil during a Crude Oil bear market in 2014.
Transparency, Liquidity, & Control
The use of exchange-traded futures markets allows for real-time and daily marked to market position level reporting, risk analytics, and performance attributes. While disclosure documents and quarterly invoicing by managers outlines all fees charged to accounts.
Managers utilize only exchange-traded futures and options, with no illiquid, opaque, hard to price OTC derivatives. This helps in entering and exiting positions, as well as allowing for investors to liquidate and have cash returned within 48 hours.
The ability to use different collateral pieces, increase and decrease trading levels on the fly, and start and stop investments as needed provides complete investor control over the structural side of the investment
How Many Clubs Are In Your Golf Bag?
An experienced golfer knows the course serves up different conditions, requiring different tools. You can’t get out of a sand trap with a driver. So why do you only use a handful of clubs when investing?
Most people invest using stocks and bonds only, and are ill prepared when the game of life puts them in the bunker (like 2008). Managed futures have become known as the crisis period investment thanks to their strong performance during stock market crisis periods such as the Internet Stock Bubble burst in 2000 and credit crisis of 2008. [Past Performance is Not Necessarily Indicative of Future Results]