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The Handbook of Commodity Investing by DIETER G. KAISER, ROLAND FÜSS, FRANK J. FABOZZI

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CHAPTER 11

CTA/Managed Futures Strategy Benchmarks

Performance and Review

Thomas Schneeweis, Ph.D.

Director

Center for International Securities and Derivatives Markets

Isenberg School of Management

University of Massachusetts

Raj Gupta, Ph.D.

Director of Research

Center for International Securities and Derivatives Markets

Isenberg School of Management, University of Massachusetts

Jason Remillard

Quantitative Analyst

Minerva Alternate Strategies, Inc.

The term managed futures represents an industry comprised of professional money managers known as commodity trading advisors (CTAs)1 or commodity pool operators (CPOs)2 who manage client assets on a discretionary basis using global forward, futures, and options markets as the primary investment medium. Managed futures provide direct exposure to international financial and nonfinancial asset sectors while offering (through their ability to take both long and short investment positions) a means to gain exposure to risk-return patterns not easily accessible with investment in traditional long-only stock and bond portfolios as well as in many alternative investments such as real estate, private equity, or commodities. Previous research has shown that managed futures often provide (1) a reduction in the volatility of stock and bond portfolios as the result of managed futures low or negative return correlation with stock and bond markets; and (2) enhanced returns to stock, bond, and stock and bond portfolios during economic environments ...

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