Lower Overall Portfolio Risk
The main benefit of adding managed futures to a balanced portfolio is the potential to decrease portfolio volatility.
Risk reduction is possible because managed futures can trade across a wide range of global markets that have virtually no long-term correlation to most traditional asset classes. Moreover, managed futures funds generally perform well during adverse economic or market conditions for stocks and bonds, thereby providing excellent downside protection in most portfolios.
One of the tenets of modern portfolio theory, as developed by Nobel prize-winning economist Professor Harry M. Markowitz is that more efficient investment portfolios can be created by diversifying among asset classes with low to negative correlations. Adding a managed futures fund to a portfolio of traditional stocks and bonds has the potential to reduce risk and improve performance.
The CTA Index is not necessarily representative of all CTAs in the industry. Only CTAs that choose to disclose their performance to this index are included in the calculation of the CASAM CISDM CTA Index used on this website.
