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Managed
Futures: Frequently Asked Questions
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What are Managed Futures?
Managed
futures is the term used to describe investing in
the futures markets with the benefit of a
professional money manager, called a “Commodity
Trading Advisor” (CTA).
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What is a CTA?
CTAs are
typically registered with a national regulatory
body, subject to oversight and monitoring by these
authorities, and required to provide adequate
disclosure to the investor. There are approximately
2,700 CTAs registered in the United States as well
as others operating under the regulations of many
other countries, including the UK.
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How do CTAs make profits?
CTAs employ
a variety of techniques that have been developed and
tested in the marketplace to attempt to achieve
profits and minimize risks. CTAs can typically
trade on technical indicators (price movement,
trading volume, chart patterns, and time series) or
on fundamental information (supply and demand data).
The quality and results of the many CTAs available
in the marketplace vary in a range as great as the
number of CTAs themselves.
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What are typical CTA fees?
The typical
CTA fees are expected to be a management fee ranging
between 1.5% and 2% per annum and a performance fee
ranging between 20% and 25% of any new net profits.
The costs are accrued daily, and all CTA results
are net of these operating costs.
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Why invest in Managed Futures?
Over the
long term managed futures represents a class of
“alternative investments” providing valuable
diversification to a traditional portfolio of
equities and bonds. Managed futures have been shown
to provide returns with little or no relation to the
timing and magnitude of the returns associated with
traditional securities.
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How do I participate in Managed Futures?
Most
investors have neither the time nor the resources to
select a CTA. That is why most investing today in
managed futures is done through products and
vehicles that are structured to aggregate investor
money and delegate advisor selection and monitoring
to an experienced managed futures intermediary.
This is where Altavra adds value to the investment
process.
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What is a Managed Futures Account?
A
professionally managed futures account is a
discretionary account managed by a CTA. The CTA
makes trading decisions on your behalf through a
revocable power of attorney.
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Is a managed Futures Account appropriate as a
short-term investment?
Quite
simply, no. Futures investing is a speculative type
of investing, and like most markets tend to be
cyclical. Additionally, even the most successful
professional traders experience periods of flat
returns or even draw-downs. Consequently, losses
will be incurred for those trading periods. The
wise investor will remain steadfast to his/her
investment plan and not close the account
prematurely in order to allow the account to recover
from those temporary losses in equity. It would not
be a wise investment strategy to open an account
that you do not intend to maintain for at least 3
years, ideally 5, to benefit from compounded returns
for the longer term.
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Are professionally managed futures for everyone?
No, they are
not. We would first provide you with all the
necessary information to make sure you understand
both the rewards and risks of this type of
investing. Generally, in addition to having the
required risk capital, an investor needs to have
realistic expectations about returns on investment,
tolerance to temporary draw-downs that inevitably
will occur, and acceptance of the reality that the
risk of loss always exists.
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How much money should
I invest in a Managed Futures Account?
Only risk
capital should be used in managed futures or any
speculative investment. Risk capital is defined as
capital that you do not want to lose, but if you
did, your lifestyle would not be affected. We
recommend that the amount of money you invest
depends on your own temperament, financial goals and
risk tolerance and should usually be approximately
5% to 25% of your overall portfolio. Each CTA
trading program has different account minimums as
detailed in their disclosure documents.
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What does Altavra add to the investment process?
Altavra,
through its relationship with Peregrine Financial
Group, Inc. (PFG), has experienced professionals
managing every aspect of the managed futures
business. With more than 2,700 futures money
managers to choose from, it is important that
investors place their money with a knowledgeable and
experienced organization. It is equally important
for investors to have confidence and trust in the
track record established by an investment firm as
well as in the individual managing their accounts. PFG
maintains records on more than 225 futures money
managers and 390 programs. Altavra works with only
those managers who meet our investment criteria and
who have proven themselves capable of managing
client assets.
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How do I find out more?
To request additional information or to discuss
managed futures as an investment alternative, please
fill out the
free consultation request form or call
1-800-998-7870.
The risk of trading futures, options and off-exchange forex can be
substantial.
Past results are not necessarily indicative of
future results.
Disclosure Statement
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