Longboard Asset Management explains how adding managed futures to a traditional stock and bond portfolio can improve diversification and reduce downside risk. Using data from 1987 to 2012, the paper argues that allocating at least 25% to managed futures can meaningfully improve return relative to risk.
The Case for Managed Futures
Longboard Asset Management
Research
11 Pages
Key Takeaways
Improved Return Risk: A portfolio with 75% traditional assets and 25% managed futures produced higher Sortino and Calmar ratios than a traditional 60/40 portfolio.
Higher Optimal Allocation: Return on risk was maximized with roughly 55% managed futures using the Sortino Ratio and approximately 60% using the Calmar Ratio.
Crisis Diversification: During the 15 worst stock market quarters from 1987 through 2012, managed futures frequently generated positive returns while equities suffered steep losses.
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