I recently participated in a panel discussion on managed futures at an investment forum for institutional investors. I found many misconceptions and myths regarding managed futures still exist. I thought this would be a good opportunity to examine some of those myths.
Managed futures as a sector of hedge funds is the fastest growing sector based on assets under management as reported by BarclayHedge. The sector has grown by over 600% since 2000. A fair amount of the recent growth in managed futures has been driven by the increasing interest for commodity related investments. Since 2008 many investors are realizing increased portfolio diversification and a decrease of correlation risk are needed components for their portfolios to reduce negative tail risk.
Below are common myths and misconceptions of the managed futures industry. Results may vary with individual managers.
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Copyright ©2014 Mark Shore. Contact Mark Shore for permission for republication at firstname.lastname@example.org Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops. www.shorecapmgmt.com
Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business, where he teaches the only known accredited managed futures course in the country. He is also a Board Member of the Arditti Center for Risk Management at DePaul University.
Past performance is not necessarily indicative of future results. There is risk of loss when investing in futures and options. Futures and options can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone. The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.