Managed Futures Today Magazine

When Managed Futures Today began publishing the quarterly top 20 managed futures programs (see pages 6 and 7 of the Nxtbook version), we noticed some patterns in the results.  Some CTAs were top performers for consecutive quarters; other CTAs had multiple programs among the top 20 performers. One CTA — Fort L.P. — piqued our curiosity because it had two managed futures programs that consistently ranked among the top 20. So, we thought we’d ring them up and get the lowdown.

Through three quarters of 2011, the managed futures performance trends that emerged earlier in the year remained intact, with discretionary and agricultural programs leading industry returns in what so far has been an up-and-down year.

Paul Kim is something of a rarity in the managed futures business these days. In a world dominated by systematic, financial-centric managers, the founder of Costa Mesa, Calif.-based Aventis Asset Management is a discretionary, fundamentally driven trader who focuses on physical commodities, with a special emphasis on grain futures.

Despite an especially weak second quarter highlighted by consecutive down months in May and June, a strong rebound in July pushed overall managed futures returns close to breakeven for the year, just as a new wave of disruptions were sweeping equity markets around the globe.

Upon receiving a Commodity Trading Advisor (CTA) disclosure document, the first thing in­vestors usually do is turn to the performance table found in the Past Performance section of the document. This is where the CTA lists the program’s monthly rate of return and aggregate yearly return.

A performance table offers a wealth of data (Table 1); some of the information easily under­standable, but most of it needs massaging with additional calculations. Thankfully, there are many CTA databases available that perform the calculations for investors. (Table 2).

Financial futures such as stock indices, interest-rates, and currencies may have garnered most of the headlines in recent years, but commod­ity futures are an integral part of the futures landscape and can play an important role in any diversified managed futures investment.

Investors and money managers interested in diversifying into managed futures are often attracted to the daily transparency and better liquidity over the typical hedge-fund structure. However, with hundreds of Commodity Trading Advisor (CTA) programs to choose from, it can be daunting to know where to start analyzing this arena. One place to begin is with CTA indices, which compile and track performance of different CTA programs.

Most investors are aware of the dangers of chasing a trend or a “hot” market: A big up move attracts lots of new buyers looking for more of the same, but at some point the market becomes saturated and when no more buyers are available, the market tanks.

“30 years of managed futures” touched on the long-term performance of managed futures relative to stocks, and the role they can play in a larger investment portfolio. One of the advantages offered by managed futures is their historical lack of correlation to other assets, particularly the stock and bond markets.

Over the past 30 years managed futures have migrated from the outskirts of finance to the center of the mainstream investing world, with more than $210 billion under management in the U.S. as of the end of 2009. In fact, managed futures assets under management (AUM) actually grew in 2008-2009 — a period that saw hedge fund AUM decline by roughly 30 percent.