With practically a zero correlation with stocks, one of the most attractive features of managed futures is its ability to add diversification to an overall investment portfolio. The ability of futures to enhance the returns of traditional investments has been documented in a study conducted by Goldman Sachs. Covering a 25-year period, the study concluded that by "allocating only 10% of a securities portfolio to commodities, investors can vastly improve their performance." Goldman Sachs' conclusion concerning the value of commodities was supported by another study published by the Chicago Mercantile Exchange (CME), one of the world's preeminent futures exchanges.

According to the CME study, "Portfolios with as much as 20% of assets in managed futures yielded up to 50% more than a portfolio of stocks and bonds alone." Keeping in mind that past performance is not indicative of future performance.

The Chicago Board of Trade's booklet, “Managed Futures, Portfolio Diversification Opportunities”, shows a portfolio with the greatest risk an least returns comprised of 50% stocks, 50% bonds, and 0% managed futures while a portfolio exhibiting the greatest returns and least risk, comprised 37.5% stocks, 37.5% bonds, and 25% Managed Futures.

Managed futures have long been employed in connection with diversifying institutional portfolios. One such example is former chief executive of Harvard University's endowment fund, Jack Meyer, who regularly included commodity and financial futures-related instruments in the portfolio. In fact, this proponent of Modern Portfolio Theory has placed himself on record by stating,  "Holding commodities offers protection against the ups and downs of stocks and bonds; they're the most diversifying asset in the portfolio. The benefits of diversification are indisputable; diversification rules. It's powerful and our portfolio is a good deal less risky [with commodities] than with only the S&P 500."

To view the track records of our money managers (CTA’s) fill in the fields below for more information.

There is substantial risk of loss in trading futures and options no matter who is managing your money.  Past performance is not indicative of future results.  An investor could lose more than the initial investment.

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If you have any questions or require additional information please do not hesitate to contact us at: 800-485-6801 or email us at info@tradinggroup.com.

Past performance is not necessarily indicative of future results. The possibility of unlimited loss exists in writing options.

 

 

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