Forward explains how managed futures have evolved into a diversified investment strategy with historically low correlations to traditional assets. It argues they have delivered equity like returns while often holding up during difficult equity markets, including a 32 year annualized return of 11.16%, making them worth a closer look for portfolio diversification.
Managed Futures: Stepping Up the Quest for Portfolio Diversifi cation
FWD
Norman Mains
Research
12 Pages
Key Takeaways
Low Correlation History: Over 32 years, the Barclay CTA Index showed a 0.01 correlation to the S&P 500 while producing an 11.16% annualized return.
Down Market Strength: Managed futures generated positive returns in every calendar year from 2000 to 2011 when the S&P 500 posted annual losses, including strong gains during 2008.
Portfolio Improvement: Replacing 20% of a traditional 60/40 portfolio with managed futures increased annualized returns from 5.6% to 6.1% while reducing volatility from 9.5% to 6.1%.
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