Commodity Trading Advisors
Who are Commodity Trading Advisors (CTAs)?
Commodity Trading Advisors are professional account managers who trade and manage your account on your behalf.
Commodity Trading Advisors make up the backbone of the Managed Futures industry. Some key attributes that separate CTAs from other styles of trading investments in the futures and commodities world include:
• CTAs publish what is a called a “Disclosure Document.” It details information about the CTA, the trading style or strategy, markets traded, if options are used, starting minimums, performance data, principal background, etc. Commodity Trading Advisors (CTAs) publish performance net of any and all fees.
• The CTAs manage accounts via a limited Power of Attorney (POA). An investor will have their own individual separated account: that is, their account and the traded futures contracts are not co-mingled with anyone else’s trades unlike that of a pool or a fund.
• A CTA program has two types of fees that typically can be charged:
• Management Fee: This fee often ranges from 0% to 2.25% annually, usually billed monthly or quarterly in arrears. The fee is generally calculated as a percentage of the annualized asset value in the account on the end-of-month or end-of-quarter date.
• Incentive Fee: CTAs charge a percentage of profits. This is the “incentive” the trader has in order to make money for the client. The incentive fee is only charged on net profits, net meaning after prior incentive fees and all costs of trading have been deducted.
If you are unfamiliar with how the industry works and how you may benefit, click on one of these links to start learning.
Performance and CTAs
Now let’s review performance in order to select CTAs that line up with your interests! This task is made much easier with our assistance using our extensive Managed Futures Database powered by Autumn Gold. Access the database HERE.
Keep in mind that you are welcome to drive the database solo. However, we really encourage you to take along one of our Foremost Capital Investment Specialists along for the first few drives. We think there’s more to evaluating the performance of a trading manager and programs than just a few stats. Though those stats are important, there is more to the picture, especially to the well-seasoned eye. Foremost Principals have personally vetted many of the managers in the database and has invested in MANY of the Commodity Trading Advisors (CTAs). We have experiences we’d like to share that we believe will make you a better investor. There is more to a car than the engine horsepower, and there is more to a trading program than Rate of Return. Let us share that experience with you.
These comments are generally true for most Commodity Trading Advisors (CTAs) however, an investor must read the disclosure document of the CTA for the details as they relate to their programmatic investment.
RISKS – While the benefits of using Commodity Trading Advisors (CTAs) to manage your futures investments are numerous, there is no way to completely eliminate risk. Investments in futures contracts are inherently risky due to the significant leverage involved in the type of contracts traded. Each investor must carefully consider whether these types of investments are appropriate for them. Investing in futures provides the opportunity for elevated returns and with that opportunity comes the elevated risk of loss. Only true risk capital should be used to invest.