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Benefits of Managed Futures

potential for enhanced portfolio returns

Open A Futures and/or Forex Trading Account.

Disclosure StatementDisclosure Statement: Open in New Window       Download PageDownload & Save:        Print Page Printable Version: Arborvitae Capital Management

Risk Disclosure Statement

 

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL.  YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.  THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU.  THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.

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In some cases, managed commodity accounts are subject to substantial charges for management and advisory fees. It may be necessary for those accounts that are subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the commodity trading advisor ("CTA").

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The regulations of the commodity futures trading commission ("CFTC") require that prospective customers of a CTA receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client's commodity interest trading and that certain risk factors be highlighted. This document is readily accessible at this site. This brief statement cannot disclose all of the risks and other significant aspects of the commodity markets. Therefore, you should proceed directly to the disclosure document and study it carefully to determine whether such trading is appropriate for you in light of your financial condition. You are encouraged to access the disclosure document by clicking the links provided AT Forms.altavra.com. You will not incur any additional charges by accessing the disclosure document. You may also request delivery of a hard copy of the disclosure document at formsbymail.altavra.com, which will also be provided to you at no additional cost. The CFTC has not passed upon the merits of participating in any of these trading programs nor on the adequacy or accuracy of any of these disclosure documents.

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Other disclosure statements are required to be provided before an account may be opened for you.

 

Portfolio Diversification: Potential for Enhanced Portfolio Returns

Does the addition of a managed futures component to a portfolio enhance overall returns?

 

By their very nature, managed futures provide a diversified investment opportunity. Trading advisors can participate in more than 150 global markets; from grains and gold to currencies and stock indices. It is also possible to further diversify by using several different Commodity Trading Advisors with different trading approaches.

 

In this example below, the overall risk (as measured by maximum drawdowns) is reduced from -63.6% to -35.9% and the return increases from 6.51% to 19.78%. This is mainly due to the lack of correlation and, in some cases, negative correlation between come of the portfolio components in the diversified portfolio. There is even negative correlation between stocks and managed futures in this example, as the two markets move independently from each other. Past results are not necessarily indicative of future results. The risk of loss in trading futures, options and off-exchange forex can be substantial.

 

From: Managed Futures: Portfolio Diversification Opportunities (http://altavra.co/wpacn). Based on a period from 1/80 to 3/12. Managed Futures Barclay CTA Index, Bonds BarCap US Agg Total Return Value Unhedged, Stocks MSCI World Index. Source: Bloomberger / CME Group. The Barclay CTA Index is a leading industry benchmark of representative performance of Commodity Trading Advisors. There are as of March 2012, 602 programs included in the calculation of the Barclay CTA Index for the year 2012, which is unweighted and rebalanced at the beginning of each year. To qualify for inclusion in the CTA Index, an advisor must have four years of prior performance history. Additional programs introduced by qualified advisors are not added to the Index until after their second year. These restrictions, which offset the high turnover rates of Commodity Trading Advisors as well as their artificially high short-term performance results, ensure the accuracy and reliability of the Barclay CTA Index.

 

A portfolio that includes managed futures, historically, would have provided higher returns and lower risk than one without managed futures at all. In this Efficient Frontier example, the addition of managed futures to the typical stock and bond portfolio increases the annual rate of return, while lowering the volatility of the portfolio. There is a point of diminishing returns, and the curve can help find maximum efficiency. In this case, the data from 1994 to February 2012 sees the optimal portfolio for the highest return at the lowest risk level to be 40% stocks, 40% managed futures, and 20% bonds. There’s no guarantee that this curve will look the same five years from now, or even a year from now. And the Efficient Frontier has a flaw in that it considers only volatility when assessing risk when there are other factors to be considered.

 

From: Managed Futures: Portfolio Diversification Opportunities (http://altavra.co/wpacn). Based on a period from January 1994 to February 2012. DJCS Managed Futures Index, CitiWorld Bond Index, S&P 500.

 

THE RISK OF LOSS IN TRADING FUTURES, OPTIONS AND OFF-EXCHANGE FOREX CAN BE SUBSTANTIAL.  PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 

 

Disclosure StatementDisclosure Statement: Open in New Window       Download PageDownload & Save:        Print Page Printable Version: Arborvitae Capital Management

 

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THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS CAN BE SUBSTANTIAL. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF ALTAVRA AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY AN ALTAVRA RESEARCH DEPARTMENT. YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FINANCIAL MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT RELY SOLELY ON THIS DOCUMENT IN MAKING TRADING DECISIONS. (ALTAVRA.CO/RISK)

THIS CONTENT AND ALL OF ITS LINKS ARE FOR INFORMATIONAL PURPOSES ONLY, AND IS CURRENT ONLY AS OF THE DATE(S) HEREOF. IT DOES NOT CONSTITUTE A SOLICITATION FOR ANY CTA OR TRADING PROGRAM, AND THE INFORMATION IS SUBJECT TO CHANGE WITHOUT NOTICE. THE FIGURES CONTAINED HEREIN WERE OBTAINED OR COMPILED FROM INFORMATION PROVIDED BY THE CTA, TRADER OR THEIR REPRESENTATIVES. NEITHER ALTAVRA NOR ANY OF ITS AFFILIATES OR EMPLOYEES MAKES ANY ENDORSEMENT OR REPRESENTATION AS TO ITS ACCURACY, VALIDITY OR COMPLETENESS. THE INFORMATION HAS NOT BEEN INDEPENDENTLY VERIFIED AND THEREFORE CANNOT BE GUARANTEED. WHILE ALTAVRA MAY PROVIDE INVESTORS WITH CTA ANALYSIS, ALTAVRA DOES NOT PROVIDE “DUE DILIGENCE” ON AN INVESTOR’S BEHALF AND IS NOT RESPONSIBLE FOR A CUSTOMER’S INVESTMENT DECISIONS.

NO OFFER OR SOLICITATION MAY BE MADE PRIOR TO REVIEW OF THE CTA’S CURRENT DISCLOSURE DOCUMENT (
FORMS.ALTAVRA.COM), WHICH INVESTORS SHOULD READ CAREFULLY PRIOR TO INVESTING. INVESTORS MAY ALSO WISH TO CONSULT THEIR LEGAL, TAX AND INVESTMENT ADVISORS TO DETERMINE WHETHER AN INVESTMENT IS APPROPRIATE IN LIGHT OF THE INVESTOR’S RISK TOLERANCE, INVESTMENT OBJECTIVES AND FINANCIAL SITUATION.

ALL FUTURES AND OPTIONS TRADING INCLUDING MANAGED FUTURES IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS WHO CAN ASSUME THE RISK OF LOSS IN EXCESS OF THEIR MARGIN DEPOSIT. NO REPRESENTATION OR ASSURANCE IS MADE THAT ANY CTA OR TRADING PROGRAM WILL OR IS LIKELY TO ACHIEVE ITS OBJECTIVES, BENCHMARKS OR TARGETED RETURNS OR THAT ANY INVESTOR WILL OR IS LIKELY TO ACHIEVE A PROFIT OR WILL BE ABLE TO AVOID INCURRING SUBSTANTIAL LOSSES. 

 
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