32.4 CTA FUNDS AND MULTI-CTA FUNDS
A CTA fund is a separate legal corporation with a board of directors that assigns trading authority to the single-manager CTA's investment management company. With a CTA fund, the investor turns the money over to the company organized by the CTA manager by filling out a subscription form and wiring the money to the account. Investors have limited liability for the fund manager's actions. Some oversight is provided by the board of directors and third parties, such as auditors, brokers, and regulators, because of the fund's status as an independent company. Additionally, for the manager's flagship fund, industry analysts, reporters, and other investors in the fund will pay attention to performance, effectively providing additional oversight.
Fund investors have a broad choice of managers, because most managers have funds, and funds are more likely to accommodate smaller investors than managed accounts. (A handful of managers will only take managed accounts, but they are unusual.) Managers like dealing with investors through funds because there are standard terms for risk, return, and liquidity.
However, a fund has less transparency for an investor than a managed account, and the amount of transparency can be variable. It is customary to provide monthly returns and a performance commentary. Liquidity can be just as variable, though, with managers offering different schedules for withdrawals, ranging from daily to annual, and requiring notice in advance ...