Patience necessary for managed futures

Oct 28, 2012 @ 12:01 am

By Jeff Benjamin

Financial advisers considering managed-futures strategies for their clients should be prepared to hold the investment for a few years.

“If you allocate to managed futures, you need to have a time horizon of two or three years if you want to minimize the chances of it having a negative impact on the portfolio,” said Norman Mains, chief risk officer at Forward Management LLC.

“Managed futures have risk-return characteristics that are similar to equities but have a low correlation to both equities and bonds,” he said.

Mr. Mains was speaking last week in Chicago as part of the InvestmentNews Alternative Investments Conference.

Fellow panelist Ranjan Bhaduri, chief research officer at Alpha-Metrix Alternative Investment Advisors LLC, concurred with the time horizon issue but also stressed the need for extensive due diligence.

“From a regulatory perspective, some of the problems we've seen in the managed-futures space will make the industry stronger, because it is a situation where we have tools in place, and I think the regulators want to start using them,” he said.

Ultimately, the extra emphasis on due diligence is usually worth the effort when it comes to managed futures, Mr. Bhaduri said.

“One thing history has taught us is that nobody has a crystal ball, and the only thing we really know is that diversification wins,” he said.

The panelists agreed that an allocation to managed futures as a portfolio diversification tool should be between 10% and 20%, with allocations across multiple managers.

jbenjamin@investmentnews.com Twitter: @jeff_benjamin

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Help special needs families get started on a lifetime of planning

Managing editor Christina Nelson talks with special projects editor Liz Skinner about specialists who say any adviser can and should get the financial ball rolling for people in this community.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

HighTower faces pressure to let investors cash out

After an IPO planned for last year didn't happen, the company could opt to satisfy its backers with a sale.

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print