ALTAVRA | Benefits of Managed Futures: Potential Reduced Volatility Risk (Printable Version)

Benefits of Managed Futures

Opportunity For Reduced Portfolio Volatility Risk

CFTC 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.

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").

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.

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

Portfolio Diversification: Opportunity for Reduced Portfolio Volatility Risk

Investors can utilize managed futures with a view to reducing volatility in their overall investment portfolio. There's a low correlation between the performance of managed futures and stock prices or interest rates.

Through a managed futures investment, investors have access to futures markets around the globe. Many of these markets are now electronically traded and offer sophisticated risk management tools. CTAs trade a host of liquid global markets ranging from currencies to stock indices, agricultural commodities, precious metals, base metals, interest rate products and so on.

Unlike other asset classes, where profits depend solely on price appreciation, opportunities in commodity futures trading exist in both rising and falling markets. Option strategies can also be employed by CTAs seeking better returns.

Thomas Schneeweis, Professor of Finance at the Center for International Securities and Derivatives Markets (CISDM) at the University of Massachusetts, Amherst released a benchmark study in June 2002 titled “The Benefits of Managed Futures” which supported use of managed futures as a way to reduce portfolio volatility risk. It states that managed futures:

:: enhance portfolio returns in economic environments in which traditional stock and bond investment media offer limited opportunities, and that managed futures

:: participate in a wide variety of new financial products and markets not available in traditional investor products

In his conclusion Professor Schneeweis wrote:

“Thus managed futures are shown on average to have a low return correlation with traditional stock and bond markets as well as many hedge fund strategies and to offer investors the potential for reduced portfolio risk and enhance investment return. As important for properly constructed portfolios, managed futures are also shown to offer unique downside risk control with upside return potential.

Simply put, the logical extension of using investment managers with specialized knowledge of traditional markets to obtain maximum return/risk tradeoffs is to add specialized managers who can obtain the unique returns in market conditions and types of securities not generally available to traditional asset managers; that is, managed futures.”

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

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