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

32.11 CONCLUSION

Available evidence suggests that CTAs benefit investors by providing meaningful diversification benefits to portfolios consisting of traditional asset classes as well as hedge funds. To achieve these benefits, investors need to consider the various ways that CTAs can be accessed. Further, to mitigate risks associated with investing in a single manager (e.g., model risk, key person risk, firm risk, etc.), the investor should consider investing in a portfolio of CTAs. Another consideration is whether to pay an additional layer of fees in order to outsource the construction of this portfolio to a multi-CTA fund or to assemble an in-house team that could select and construct the portfolio. Finally, for those investors who plan to make a substantial allocation to CTAs, a managed account platform will provide substantial transparency, control, and customization of the CTA investment program.

* Portions of Chapters 29 to 32, were originally published in Galen Burghardt and Brian Walls, Managed Futures for Institutional Investors: Analysis and Portfolio Construction (Hoboken, NJ: Bloomberg Press, 2011).

1 For examples, see Irwin, Zulauf, and Ward (1992); Irwin (1994); McCarthy, Schneeweis, and Spurgin (1996); Schneeweis, Spurgin, and McCarthy (1997); Brorsen (1998); Goetzmann and Park (2001); and Edwards and Caglayan (2001).