Studies

STUDIES

CME Group Managed Futures Study:

The CME Group publication "Managed Futures: Portfolio Diversification Opportunities" states that from 01/1987 to 02/2008 including up to 20% of total investments in managed futures funds enhanced portfolio diversity and therefore promoted greater independence from general market moves. For more information on the benefits of investing in alternative investments like managed futures and trendfollowing systems See Managed Futures CME Group 2008.pdf

Investing in Managed Futures involves risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results. Investors must read the appropriate disclosure document or private placement agreement before they invest.

Harvard Prof. John Linter's Landmark Study

The Potential Role of Managed Commodity-Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds.

The study stated that including managed futures in a portfolio has the potential to "reduce volatility while enhancing return" and that:

"the improvements from holding an efficiently-selected portfolio of managed accounts or funds are so large, and the correlation between returns on the futures portfolios and those on the stock and bond portfolios are so low (sometimes even negative), that the risk/return tradeoffs provided by augmented portfolios...clearly dominate the tradeoffs from portfolio of stocks alone or from a portfolio of stocks and bonds."

While Managed Futures returns can be volatile, when a component of Managed Futures is added to a larger portfolio of securities, the low correlation and diversification benefits of Managed Futures can help reduce a portfolio's overall volatility while enhancing its total return.

Yale and Wharton Study

Yale Professor K. Geert Rouwenhorst and Wharton's Dr. Gary Gorton wrote a research paper in June of 2004, "Facts and Fantasies about Commodity Futures." The study's findings include:

"Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio (a measure of risk-adjusted returns) as equities."

"While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns."

"There are large differences between the historical performance of spot (cash) commodity prices and collateralized commodity futures returns. The historical return to an investment in commodity futures has far exceeded the return to a holder of spot commodities."

The study also reaffirms that investing in commodity futures has significantly out-performed investing in commodity company stocks over a 41 year period.

The study reports: "...a significant difference between the average return of commodity futures and investment in commodity company stocks. Over the 41 year period between 1962 and 2003 the cumulative performance of futures has been triple the cumulative performance of "matching" equities." See Yale Wharton Study

Note: Past performance is not necessarily indicative of future results. Investing in managed futures involves substantial risk of loss and is not suitable for everyone. Many different market factors can affect the performance of a portfolio.

Wall Street Journal 5 Year Study

The firm with the best performance was the only firm that had included futures in their asset allocation.

Diversification Benefits Of Managed Futures

By Thomas Schneeweis PhD and Bhaswar Gupta PhD.

"The study concluded that managed futures trade in markets that offer investors the same market integrity and safety as stock and bond markets. The study also included that managed futures are not more risky than traditional equity investments and offer unique return opportunities."

"It is clear that over the past fifteen years alternative investments have offered substantial diversification benefits." See Diversification Benefits Of Managed Futures

Goldman Sachs 25 Year Study

The study concluded that by "allocating only 10% of a traditional securities portfolio to commodities, investors can vastly improve their performance."

Goldman Sachs conclusion regarding the valuation of commodities, was supported by another study published by the Chicago Merchantile Exchange, one of the world's major future exchanges.

Chicago Merchantile Exchange Study

"Portfolios with as much as 20% of assets in managed futures yield up to 50% more than a portfolio of stocks and bonds alone."

Past performance is not necessarily indicative of future results. Investing in managed futures involves risk of loss and is not suitable for everyone. Many different market factors can affect the performance of a portfolio. Investors must read the disclosure document before they invest.

How Managed Futures Fared During Worst Case Declines In Stocks

In another study by University of Massachusetts' Finance Professor Thomas Schneeweis, he compared the S&P 500's worst 12 months and best 12 months since 1985 and found that managed futures posted gains during both periods.

The above examples demonstrate the diversification benefits of including a portion of your investment capital in managed futures. Past performance is not necessarily indicative of future results.

VOLATILITY

The CBOT chart below compares the volatility between U.S. Stocks, Commodities and 10-Year T-Notes between 1992-2004.

Low Correlation to Traditional Investments

Managed futures investments have historically performed independently of the stock and bond markets. Because of this low correlation, managed futures provide valuable diversification benefits that have the potential to help investors reduce the portfolio's overall risk of volatility and increase its rate of return.

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