A brief overview of a hedge fund strategy used in alternative investment markets.

1. Hedge Fund Strategies
Managed futures

2. Managed futures
Index:
1. Definition
2. Advantages
3. CTA evaluation
3.1. Trading Program
3.2. Annualized Rate of Return
3.3. Risk-Adjusted Return

3. 1. Definition
Managed futures: are used futures contracts by
investors as part of their overall investment strategy.
Among various types of asset classes and investment
styles to help mitigate portfolio risk in a way that is
not possible in direct equity investments, providing
portfolio diversification.
(Investopedia, 2011)

4. 1. Definition
Commodity Trading Advisors (CTAs): are the managers in this
sector, because most CTA activity was in commodities.
Currently, they are largely focused on financial futures markets
— fixed income, equity indices, and foreign exchange — with
additional
allocations to metals, energy and agricultural
markets.
(CME Group, 2011)

5. 2. Advantages
The addition of uncorrelated variance may have a beneficial
effect on other performance and risk metrics, so tend to reduce
portfolio variance;
Mitigate many of the risks associated with model risk because
the exchange-listed underlying instruments used by CTAs;
Flexibility and cash efficiency because the use of margining
process.
(CME Group, 2011)

6. 3. CTA evaluation
Before investing should be make some important
assessments, and found information in the CTA's
disclosure document (trading plan and fees)
(CME Group, 2011)

7. 3.1. Trading Program
Two types of trading programs:
- Trend followers: they have signals of when to go long or short in
certain futures markets, through technical or fundamental
trading systems (or a combination of them);
- Market-neutral: investors tend to profit, in the same market,
from spreading different commodity markets or different
futures contracts. Also, there are the options-premium sellers
who use delta-neutral programs.
(CME Group, 2011)

8. 3.2. Annualized Rate of Return
Is always required to be presented as net of fees and
trading costs. These performance numbers are
provided in the disclosure document, where, no later
than every nine months, CTAs must update their
disclosure document;
(CME Group, 2011)

9. 3.3. Risk-Adjusted Return
It’s important to get more formal about assessing
risk, and the Return on a risk-adjusted basis is the
most important measure to be compared.
(CME Group, 2011)

10. References
CME Group, 2011, ‘Frequently Asked Questions About
Managed Futures’, Brochure, trademark of Chicago
Mercantile Exchange Inc
Investopedia, 2011, ‘An Introduction To Managed
Futures’
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2013,
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http://www.investopedia.com/articles/optioninvestor/
05/070605.asp