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- Financial Services Guide
What are managed futures?
What are managed futures?
Managed futures funds invest primarily in futures, options, forwards and other derivative contracts. There is over USD 200 billion currently invested in the managed futures industry.
By investing in managed futures funds, investors can obtain exposure to a diverse range of market sectors including currencies, bonds, agriculturals, energies, metals and stock indices.
Follow the trends - up or down
The majority of managed futures funds are 'trend-following'. They seek to identify, and capitalise on, sustained price trends in sectors such as currencies, bonds, agriculturals, energies, metals and stock indices.
These price trends can be either upwards or downwards, as managed futures funds have the flexibility to buy or sell futures contracts.
Understanding managed futures with a hypothetical example
To see a hypothetical example of how a trend-following managed futures fund might invest, consider the movements in the price of oil between 2007 and mid-2009:
In the first period, as indicated below, there is a strong upwards movement in the price of oil. A managed futures fund could buy futures contracts on oil and profit from the increase in the price of oil.
In the second period, as indicated below, the price of oil is trending downwards. In this situation, if a managed futures fund sold futures contracts on oil, it can profit from the decrease in the price of oil.
As in the example above, managed futures funds are able to generate positive returns in both rising and falling markets because, unlike traditional investments, they can buy and sell instruments, and therefore do not have to rely solely on markets appreciating in value.
Performance, diversification and transparency -
3 reasons to consider managed futures
An investment in a managed futures fund can offer investors:
Historically, if there are clear and sustained trends in global markets, managed futures funds have demonstrated that they can capture profits in both rising and falling markets.
Managed futures funds have historically shown the ability to generate performance when the price of traditional assets are falling.
In light of this, an investment in managed futures is generally seen as a way for investors to complement, or diversify, a traditional investment portfolio.
Managed futures funds typically trade standardised futures contracts on highly regulated and liquid exchanges, including the Sydney Futures Exchange.
Futures exchanges use clearing houses to guarantee transactions, thus mitigating counterparty risk. This effectively increases liquidity and makes it possible for managed futures funds to continue trading in periods of severe market stress.
Managed futures at Man
In 2012, AHL celebrates 25 years in operation, making it one of the longest running providers of quantitative trading programs in the managed futures industry.
- Dr. Anthony Ledford, Chief Scientist at AHL, discusses the merits of managed futures
- Read about AHL
- Read our report, De-mystifying managed futures
- Read our report, Understanding managed futures
- Read about Man's funds