CAIA Level II: Advanced Core Topics in Alternative Investments, 2nd Edition

29.9 CONCLUSION

Perhaps the toughest question asked by investors who are considering CTAs or managed futures investments for the first time is why CTAs should make money. After all, investments in most hedge funds in general and CTAs in particular are not investments in conventional assets such as stocks, bonds, and real estate. Stocks, bonds, and real estate represent ownership claims on assets that generate real yields or income. That is, investors expect to earn a positive rate of return in the long run for holding these assets. Issues related to the sources of return to CTAs, historical performance, and benchmarking of CTAs and construction of portfolios consisting of CTAs are discussed in the next three chapters.

1 Examples of derivatives are various swaps, options, and forward contracts.

2 The bankruptcy of MF Global, a large FCM, highlights the counterparty risks associated with an FCM. These are further discussed later in this chapter and in Chapter 32.

3 See https://www.mtlucas.com/ and www.ingarm.org/.

4 Other approaches to passive indices include those described in Spurgin (1999) and Jaeger, Cittadini, and Jacquemai (2002).

5 This section briefly offers an example of a regulatory structure based largely on the current U.S. system; rules in other countries will differ.

6 For discussions of these benefits, see Schneeweis (2009) and Burghardt and Walls (2011).

7 See www.nfa.futures.org.

8 The amount of insurance is currently limited to $500,000 for securities and $250,000 ...