Home > Financial Services > Financial Services: A Guide Towards Investment In Managed Futures
Financial Services: A Guide Towards Investment In Managed Futures |
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Managed futures are investment options and are similar to mutual funds. Managed futures, are however, positioned in government securities and are managed through future contracts or various options on future contracts.Those who invested in managed futures just few years back have made double the money they originally invested, with the help of their brokers assisting them offering the necessary financial services. Analysts are very optimistic on the future of managed futures. They expect the market to continue to grow in the medium to long-term if stocks under-perform or returns on hedge funds are flat. Managed Futures Offer Efficient Hedging Mechanism Managed futures come across as an attractive investment option because of their potential of reducing portfolio risk. Market studies indicate that when asset classes are combined with alternative investment options like managed futures, risk significantly reduces. This is because such a combination diversifies the portfolio through negative correlation between various asset groups. Managed futures have inverse correlation with bonds and stocks. They can successfully track the performance of various stocks and provide an efficient hedge mechanism to any potential damage to equities in adversities. This means, managed futures program are outperforms even in the conditions of rising inflation when the stocks and bonds generally under-perform. Thus, fund managers and financial service providers suggest combining managed futures with various other asset groups for better allocation of your investment capital. Who Manages Your Managed Futures Managed futures are managed by specialized financial service providers known as 'money mangers' or commodity trading advisors (CTAs). These financial service providers or CTAs are the registered representatives of the U.S. Commodity Futures Trading Commission (CFTC). They are given license to do the business only after the FBI thoroughly checks their background; they are bound to produce all the disclosure documents such as independent audits of financial statements on an annual basis before the National Futures Association (NFA) for review. The financial service providers take decisions on the positions of the managed futures based on their analysis of the potential profits the futures would yield. They manage their clients' futures by a proprietary trading system through long or short future contracts in various industries. Evaluate Your CTAs before Investing With Them You must make some important assessments before making the final decision of investing in a particular asset class with a financial service provider or money manger. You can obtain all the necessary information for such assessments in the disclosure documents that will be provided to you by the financial service providers themselves. Insist on getting the disclosure document even during the initial stages of your meetings with the CTAs, when you might be just considering an investment option. Such a document will have all the necessary details pertaining to the CTAs trading plan and the fees they charge. Mostly, the CTAs charge 2% management fees and demand 20% as performance incentive. However, such fees may differ largely in some cases. |
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