5 Salient Benefits of Portfolio Diversification with Managed Futures

Managed Futures strategies are market direction agnostic and let investors?do something?about global market uncertainty and volatility caused by events like COVID-19, Brexit (In Brexit Rout, Managed Futures Funds Emerge as Big Winners - Bloomberg), oil prices crashing, and the 07/08 Great Financial Crisis (GFC).

1- Uncorrelated or limited correlation to traditional asset classes. Managed Futures are an alternative asset class that has achieved strong performance in all kinds of market and economic conditions, exhibiting low correlation to traditional asset classes, such as equities, fixed income, real estate and cash.

Source: CME Group

2- Opportunity of reduced overall portfolio risk and potential for enhanced portfolio returns. Managed Futures, when used in conjunction with traditional asset classes, may reduce risk, while at the same time potentially increasing returns. Endowments, SWFs, Pension Plan Sponsors, Trusts and Foundations have long used Managed Futures to generate returns in excess of the S&P 500.

3- Opportunity to participate easily in global markets. One can have access to a wide variety of global futures products that are liquid and transparent. There are more than 150 liquid futures products across the globe, including stock indexes, energy, fixed income, agricultural products and metals. Managed Futures invest across a broad spectrum of asset classes with the goal of achieving consistent long-term returns.

4- Clearing and Risk Management. CME Clearing institutes some of the most sophisticated risk management practices in the financial world. For more than 100 years, CME Clearing has provided services that substantially mitigate the risk of clearing member failure along with resources to ensure the performance of every contract on the exchanges.

Source: CME Group

5- Ability to be successful in any economic environment. Managed Futures may generate returns in bull and bear markets, enabling consistent long-term track records despite economic downturns. Moreover, they often do so with limited volatility in such periods and smaller drawdowns than other asset classes (see chart above).

Overall industry growth has been exceptional. In the last 4 decades , assets under management (AUMs) for the Managed Futures industry have grown 1000 fold. Current assets under management stand at over c. $300 billion.

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