Managed Futures are an alternative investment avenue that allow investors to diversify their portfolios and, under some conditions, minimize risk. Individual & Institutional investors alike may seek alternative investment opportunities such as managed futures when they do not have the time to constantly monitor markets, see lackluster opportunities in the investment vehicles they know well, or simply want to remove themselves from the emotional component of making their own trading decisions.
“Managed Futures” refers to a 30+ year-old industry made up of professional traders, also known as “Commodity Trading Advisors”, or CTAs. Commodity Trading Advisors are put through rigorous due diligence processes before they can offer themselves to investors as money managers. They are required to register with the Commodity Futures Trading Commission (CFTC), go through an FBI deep background check, and provide thoroughly audited disclosure documents (including annual audits of financial statements every year), which are then checked by the National Futures Association (NFA).
Generally, CTAs will manage their client’s money using their own discretionary method, or proprietary trading system that they have developed. This may involve entering in long or short futures, or options contracts in various areas of the markets, such as equity indexes (S&P 500, Dow Jones, NASDAQ), interest rates (Bonds, Notes, Eurodollar Time Deposits), energy products (Crude Oil, Natural Gas, RBOB Gasoline), grains (Corn, Soybeans, Wheat) , or softs (Cotton, Coffee, Sugar).