Managed Futures For Portfolio Diversification

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Managed Futures Portfolio Showcase 1 of 4

January 19, 2017

Portfolio Showcase 1

At Foremost Capital, we help allocate your capital to different Commodity Trading Advisors (CTAs) that match your unique risk tolerance and investing goals.  Given the diversity in the CTA universe, the managed futures portfolio for you may not look anything like your neighbor’s.

Managed Futures Portfolio Showcase 1 of 4

Blend of CTAs

If you’ve never been exposed to managed futures before, or you’re not sure how the process works, one of our specialists would be happy to walk you through it.  In this series of blogs we have created four theoretical clients along with risk/reward profiles and parameters and then corresponding hypothetical portfolios of CTAs. This suggestion is a starting point for more thorough conversation. While Foremost may select some CTAs that meet the client’s parameters and produce a blend for consideration — it is the client that ultimately chooses which CTAs are most suitable. Often, the starting portfolio is used to demonstrate and discuss how different track records, correlation values, and strategies can be used together to smooth the equity curve. 

Please note, these are fictitious profiles, they are not strict recommendations for the profiled person nor for the investment community at large.

Keep in mind that trading futures involve significant risk and that CTA blends are based on an individual’s specific criteria including: performance objectives, markets desired, risk parameter, and volatility tolerance.

Managed Futures Portfolio Showcase 1 of 4

Investor “Rick”

So, meet a theoretical client, Rick…age 55
Occupation: Small Business Owner
Risk Tolerance: Medium
Return Goal: Medium to High
Account Ownership Type: IRA
QEP Status: Yes  (More info on what is a QEP Click HERE)

Rick indicated he was looking for an alternative investment that has a low correlation with the S&P 500, good risk-adjusted returns for the blend, and has indicated he has a moderate level risk tolerance and desire for ROR (return on investment).

After speaking with Rick and hearing him share his needs, we may propose a portfolio like the one HERE or click on the thumbnail above to see an example of the hypothetical composite CTA portfolio. It is important to know that we take the time to discuss the merits and risks of managed futures. Please note that the disclosure documents for each CTA should be reviewed before making any investments decisions.

The Hypothetical Performance Capsule Summary for Sept 2011-Dec 2016:

  • Cash Invested: $350,000
  • Investment Start Date: September 2011
  • Annualized Compounded ROR (return on investment): 16.51%
  • Total Return: 125.93%
  • Peak to Valley Drawdown: (-8.44%)
  • Dates of Peak to Valley Drawdown: Sep 2014 – Oct 2014

View the individual Performance Sheets for:
Goldenwise – Quant MS (P&C) QEP Only
White River Group – SI Option Writing
Wharton Capital Management – Ag Futures 

Regardless of whether your profile is similar to Rick’s or not,  if the idea of portfolios has you intrigued and you would like to know more or have questions, please give us a call!

Past Performance is not necessarily indicative of future results. Customized portfolios of CTA strategy blends are based on an individual client’s specific criteria; including performance objectives, markets desired, risk parameters, and volatility tolerance. All CTA strategy blends are presented as hypothetical, and there is no guarantee that a portfolio will perform similarly to the historical composite performance. The performance numbers presented herein are based on information supplied by the CTAs reporting to AUTUMNGOLD.COM. These individual program results are net of commissions and CTA management and performance fees. All calculations are based on nominal account size (the account size agreed to by the client that establishes the level of trading in the particular trading program.)

THIS COMPOSITE PERFORMANCE RECORD IS HYPOTHETICAL AND THESE TRADING ADVISORS HAVE NOT TRADED TOGETHER IN THE MANNER SHOWN IN THE COMPOSITE. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY MULTI-ADVISOR MANAGED ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE A COMPOSITE PERFORMANCE RECORD SIMILAR TO THAT SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.

ONE OF THE LIMITATIONS OF A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD IS THAT DECISIONS RELATING TO THE SELECTION OF TRADING ADVISORS AND THE ALLOCATION OF ASSETS AMONG THOSE TRADING ADVISORS WERE MADE WITH THE BENEFIT OF HINDSIGHT BASED UPON THE HISTORICAL RATES OF RETURN OF THE SELECTED TRADING ADVISORS. THEREFORE, COMPOSITE PERFORMANCE RECORDS INVARIABLY SHOW POSITIVE RATES OF RETURN. ANOTHER INHERENT LIMITATION ON THESE RESULTS IS THAT THE ALLOCATION DECISIONS REFLECTED IN THE PERFORMANCE RECORD WERE NOT MADE UNDER ACTUAL MARKET CONDITIONS AND, THEREFORE, CANNOT COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FURTHERMORE, THE COMPOSITE PERFORMANCE RECORD MAY BE DISTORTED BECAUSE THE ALLOCATION OF ASSETS CHANGES FROM TIME TO TIME AND THESE ADJUSTMENTS ARE NOT REFLECTED IN THE COMPOSITE.

Our specialists walk through this process every day with our investors.  Call us to see what managed futures may offer you!

888-818-0880

 

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