The authors explain how managed futures largely derive their returns from simple time series momentum strategies rather than mysterious trading techniques. They show trend following explains much of manager performance, while arguing that fees and implementation, not secret insights, often separate investor outcomes.
Demystifying Managed Futures
Brian Hurst, Yao Hua Ooi
Research
29 Pages
Key Takeaways
Momentum Explains Returns: Time series momentum explains Managed Futures returns with correlations ranging from 0.66 to 0.78, leaving little unexplained alpha after controlling for the strategy.
Strong Risk Adjusted Results: A diversified time series momentum strategy achieved a gross Sharpe ratio of 1.8 while performing well during both extended bull and bear markets.
Implementation Matters: Typical 2% management and 20% performance fees translate to roughly 6% annual fees, with transaction costs adding another 1% to 4% annually.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
Related Content
