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1.
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Definition
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A
Managed Futures Account (MFA) is a form of alternative investment,
similar to a mutual fund, that takes long and short positions in
futures contracts, government securities, and options on futures
contracts.
Managed futures are operated by licensed Commodity Trading Advisors,
or CTAs, who are regulated in the United States by the Commodity
Futures Trading Commission and the National Futures Association, or
NFA. Some are compensated on a performance fee basis, usually 15% to
30% of profits. Other CTAs are compensated by charging a per trade
cost whenever the account or fund trades. Most CTAs also charge a
management fee per year, usually between 1% to 2% of the account
size.
Other Resources:
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National Futures
Association:
Represents an industry comprised of professional money managers
who manage client assets on a discretionary basis, using global
futures markets as an investment medium.
More…
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Peregrine Financial Group:
Managed futures are a type of alternative investment established
to trade in global futures, options and Forex markets in which
successful performance does not depend on continued upward
movement in traditional equity or bond markets.
More…
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Cornerstoneway:
Managed Futures is a member of the National Futures Association
and is registered as a Commodity Pool Operator.
More…
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Turtle Trader:
Broadly
speaking,
managed futures is an investment for the purpose
of speculating in futures and options markets.
More…
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2.
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Examples, Types, or
Variations
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Managed
futures accounts include, but are not limited too, commodity pools
and commodity funds.
MFAs are generally managed on the basis of technical analysis, and
involve going long or short in futures contracts in areas such as
metals, grains, equity indexes and commodities of all kinds.
Currency futures are also commonly traded.
One strategy,
known as an overlay, is to add a portfolio of managed futures
to an existing portfolio to introduce new exposure.
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3.
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Formula
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4.
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Related Terms
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Global Futures
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Commodity Pool Operator (CPO)
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Futures Contract
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Overlay Strategy
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National Futures Association
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Managed Account
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Commodity Trading Advisor (CTA)
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Volatility
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5.
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As
Used in the Hedge Fund World
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Other Resources:
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Abacus:
Investment
management professionals have been using managed futures for
more than 30 years. More recently, institutional investors such
as corporate and public pension funds, endowments and trusts,
and banks have made managed futures part of a well-diversified
portfolio.
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Morgan Stanley:
Managed Futures is an industry in which professional money
managers direct investments in the global currency, interest
rate, equity, metal, energy and agricultural markets.
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Chicago Board of Trade:
The term managed futures describes an industry made up of
professional money managers known as commodity trading advisors
(CTAs).
More…
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6.
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Applications
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Other Resources:
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ProManaged Futures:
Managed futures, by their very nature, are a diversified
investment opportunity. Trading advisors have the ability to
trade in over 50 different markets worldwide.
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UBS:
If
you're looking to diversify your portfolio, you may want to
consider adding an alternative asset class, such as managed
futures. The potential benefits of managed futures include:
More…
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Chicago Board of Trade:
The benefits of managed futures within a well-balanced portfolio
include: opportunity for reduced portfolio volatility risk.
More…
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Peregrine Financial Group:
Who should
invest in managed futures?
We believe
that many investors, including individuals, corporations and
institutional investors, can benefit from including managed
futures in their portfolios because managed futures, as an asset
class, can provide valuable diversification to a traditional
portfolio of equities and fixed income investments.
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7.
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Misused
& Abused
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Other Resources:
-
Morgan Stanley:
Risk
Considerations:
Typically, managed futures investments are speculative, involve
a high degree of risk, have substantial charges and are suitable
only for the risk capital portion of an investor's portfolio.
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8.
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Additional Sources of Information
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Books
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News
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Scholarly Papers
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Back to Terms
| HEDGE FUND RISK AND OTHER
DISCLOSURES |
Hedge funds, including fund of funds (“Hedge
Funds”), are unregistered private investment partnerships, funds or
pools that may invest and trade in many different markets,
strategies and instruments (including securities, non-securities and
derivatives) and are NOT subject to the same regulatory requirements
as mutual funds, including mutual fund requirements to provide
certain periodic and standardized pricing and valuation information
to investors. There are substantial risks in investing in Hedge
Funds. Persons interested in investing in Hedge Funds should
carefully note the following:
- Hedge Funds represent speculative investments and involve a
high degree of risk. An investor could lose all or a substantial
portion of his/her investment. Investors must have the financial
ability, sophistication/experience and willingness to bear the
risks of an investment in a Hedge Fund.
- An investment in a Hedge Fund should be discretionary capital
set aside strictly for speculative purposes.
- An investment in a Hedge Fund is not suitable or desirable for
all investors. Only qualified eligible investors may invest in
Hedge Funds.
- Hedge Fund offering documents are not reviewed or approved by
federal or state regulators
- Hedge Funds may be leveraged (including highly leveraged) and
a Hedge Fund’s performance may be volatile
- An investment in a Hedge Fund may be illiquid and there may be
significant restrictions on transferring interests in a Hedge
Fund. There is no secondary market for an investor’s investment in
a Hedge Fund and none is expected to develop.
- A Hedge Fund may have little or no operating history or
performance and may use hypothetical or pro forma performance
which may not reflect actual trading done by the manager or
advisor and should be reviewed carefully. Investors should not
place undue reliance on hypothetical or pro forma performance.
- A Hedge Fund’s manager or advisor has total trading authority
over the Hedge Fund.
- A Hedge Fund may use a single advisor or employ a single
strategy, which could mean a lack of diversification and higher
risk.
- A Hedge Fund (for example, a fund of funds) and its managers
or advisors may rely on the trading expertise and experience of
third-party managers or advisors, the identity of which may not be
disclosed to investors
- A Hedge Fund may involve a complex tax structure, which should
be reviewed carefully.
- A Hedge Fund may involve structures or strategies that may
cause delays in important tax information being sent to investors.
- A Hedge Fund may provide no transparency regarding its
underlying investments (including sub-funds in a fund of funds
structure) to investors. If this is the case, there will be no way
for an investor to monitor the specific investments made by the
Hedge Fund or, in a fund of funds structure, to know whether the
sub-fund investments are consistent with the Hedge Fund’s
investment strategy or risk levels.
- A Hedge Fund may execute a substantial portion of trades on
foreign exchanges or over-the-counter markets, which could mean
higher risk.
- A Hedge Fund’s fees and expenses-which may be substantial
regardless of any positive return- will offset the Hedge Fund’s
trading profits. In a fund of funds or similar structure, fees are
generally charged at the fund as well as the sub-fund levels;
therefore fees charged investors will be higher that those charged
if the investor invested directly in the sub-fund(s).
- Hedge Funds are not required to provide periodic pricing or
valuation information to investors.
- Hedge Funds and their managers/advisors may be subject to
various conflicts of interest.
The above general
summary is not a complete list of the risks and other important
disclosures involved in investing in Hedge Funds and, with respect
to any particular Hedge Fund, is subject to the more complete and
specific disclosures contained in such Hedge Fund’s respective
offering documents. Before making any investment, an investor should
thoroughly review a Hedge Fund’s offering documents with the
investor’s financial, legal and tax advisor to determine whether an
investment in the Hedge Fund is suitable for the investor in light
of the investor’s investment objectives, financial circumstances and
tax situation.
All performance information is believed
to be net of applicable fees unless otherwise specifically noted. No
representation is made that any fund will or is likely to achieve
its objectives or that any investor will or is likely to achieve
results comparable to those shown or will make any profit at all or
will be able to avoid incurring substantial losses. Past performance
is not necessarily indicative, and is no guarantee, of future
results.
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appropriateness or suitability of an investment, or intended to be
an offer, or the solicitation of any offer, to buy or sell any
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delivery of appropriate offering documents to qualified investors.
Before making any investment, you should thoroughly review the
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financial, legal and tax advisor and conduct such due diligence as
you (and they) deem appropriate. We do not provide investment advice
and no information or material on the Site is to be relied upon for
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The information on this Site is as of the date(s) indicated,
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more complete disclosures and terms and conditions contained in a
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returns, valuations, fund targets and strategies, has been supplied
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believed to be reliable, has not been independently verified and its
completeness and accuracy cannot be guaranteed. No warranty, express
or implied, representation or guarantee is made as to the accuracy,
validity, timeliness, completeness or suitability of this
information.
Any indices and other financial benchmarks
shown are provided for illustrative purposes only, are unmanaged,
reflect reinvestment of income and dividends and do not reflect the
impact of advisory fees. Investors cannot invest directly in an
index. Comparisons to indexes have limitations because indexes have
volatility and other material characteristics that may differ from a
particular hedge fund. For example, a hedge fund may typically hold
substantially fewer securities than are contained in an index.
Indices also may contain securities or types of securities that are
not comparable to those traded by a hedge fund. Therefore, a hedge
fund’s performance may differ substantially from the performance of
an index. Because of these differences, indexes should not be relied
upon as an accurate measure of comparison.
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