Managed

“Commodities are a unique asset class that can provide valuable diversification benefits to an investment portfolio. Used in combination with traditional assets like stocks and bonds, they can potentially reduce overall portfolio long-term risk while increasing upside potential.” Greg Sweet, President, Lotus Brokerage

 

Have you considered diversifying your portfolio with exposure to the commodities market?

Source: BarclayHedge, Ltd.; CME Group Managed Futures

Lotus Brokerage has a healthy relationship with a variety of different professional money managers known as Commodity Trading Advisors (CTAs). These trading advisors manage client assets on a discretionary basis using global futures as an investment medium.

What are managed Futures?

Domestic and international corporations, banks, insurance companies, mutual fund managers, and trading firms use the futures markets to manage their continuous exposure to price changes. Futures markets make it possible for these hedgers to transfer that risk exposure to other market participants. CTAs are responsible for the actual trading of managed accounts. They use a mixture of technical and fundamental analysis to capture markets through proven quantitative analysis. They implement a proprietary trading system, or a discretionary method, that may involve going long or short in futures contracts in areas such as metals (gold, silver), grains (soybeans, corn, wheat), equity indexes (S&P futures, Dow futures, NASDAQ 100 futures), soft commodities (cotton, cocoa, coffee, sugar), as well as foreign currency and U.S government bond futures. In the past several years, money invested in managed futures has more than doubled and is estimated to continue to grow in the coming years if hedge fund returns flatten and stocks under perform.

How can you benefit from Managed Futures?

1. Reduced Portfolio Volatility Risk
The primary benefit of adding managed futures to an already diversified investment portfolio is that it may decrease portfolio volatility risk. Nobel Prize winning economist, Dr. Harry M. Markowitz has proven that adding managed futures to an efficient investment portfolio can create a more well balance investment by diversifying among asset categories with low to negative correlations.

2. Potential for Enhanced Portfolio Returns
While managed futures can decrease portfolio risk, they can also simultaneously enhance overall portfolio performance.

3. Ability to Profit in Any Economic Environment
Managed futures trading advisors can take advantage of price trends. They can buy futures in anticipation of rising markets or sell in anticipation of a falling market. Therefore they can profit in any type of market condition, and even implement strategies employing options, calendar and inter-market spreads.

4. Ease of Global Diversification
The establishment of global futures exchanges and the accompanying increase in actively traded contract offerings has allowed trading advisors to diversify their portfolios by geography as well as by product.

Managed futures investments have been used by individual investors for more than 26 years. As an asset class, managed futures are increasingly being recognized as an important investment alternative that may potentially enhance the returns and lower the overall volatility of a diversified investment portfolio.

Many different futures markets

Source: CME Group Managed Futures

Managed futures are highly flexible financial instruments traded on many regulated financial and commodity markets around the world. By broadly diversifying across global markets, managed futures can simultaneously profit from prices changes in stock, bond, currency and money markets, as well as from diverse commodity markets having virtually no correlation to traditional asset classes.

 

 

Over the past 27 years, managed futures have outperformed almost every other asset class, including high-performing S&P 500 Returns.
Looking back over the past few decades, managed futures have consistently outperformed other asset classes such as stocks and bonds. Consider an initial investment of $10,000 invested in 1980. If placed in a U.S. stock fund mirroring the S&P 500, the investment would have been worth approximately $288,000 as of early 2008. Allocating the same amount to a basket of international equities reflecting the Morgan Stanley Capital International Index of world stocks, the initial investment would have grown to nearly $120,000. But the same investment in managed futures, based on the Center for International Securities and Derivatives Markets weighting, would now be worth more than $513,000.

Disclaimer:

The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

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