Managed Futures Break Records in October
November 11, 2008
This past October may have been one of the best months of the year for the Managed Futures sector.
Commodity Trend Followers were best positioned for strong directional moves in a number of commodity futures markets.
The Managed Futures sector capitalized on short equity, short commodities and long US dollar positions to generate its best monthly return this year and positioning it as one of only two positive performing sectors in October.
Early estimates indicate that the Credit Suisse/Tremont Hedge Fund Index was down approximately 5% in October, as extreme market volatility and extraordinary government intervention created a difficult trading environment. Conversely, the Credit Suisse/Tremont Managed Futures Index was up just over 5% for the same period.
Investment management professionals have been using managed futures for more than 30 years. More recently, institutional investors such as corporate and public pension funds, endowments and trusts, and banks have made managed futures part of a well-diversified portfolio. In 2008, it was estimated that over $227 billion was under management by commodity trading advisors.
The growing use of managed futures by these investors may be due to increased institutional use of the futures markets. Portfolio managers have become more familiar with futures contracts. Additionally, investors want greater diversity in their portfolios. They seek to increase portfolio exposure to international investments and nonfinancial sectors, an objective that is easily accomplished through the use of global futures markets.
The term managed futures describes an industry made up of professional money managers known as commodity trading advisors (CTAs). These trading advisors manage client assets on a discretionary basis using global futures markets as an investment medium.