Managed Futures in Action, An update

  • Written by David
  • October 14, 2011 at 3:54 pm
  • 0
  • Managed Futures; An update May 31, 2012

    Last October I discussed how managed futures performed so well during the third-quarter in 2011. That original text is below. Here is an update on the same asset class during May 2012. Summation, strong out-performance during May for ‘managed futures.’ Granted, managed futures have had sideways performance earlier this year.

    The two graphics below reflect two separate managed futures portfolios (yellow line) verses the S&P 500 index (red line)

    Simply, the S&P 500 index is down about -7.0% for May while the managed futures portfolios have increased about +2.5%. This is over a 9% difference between stocks and managed futures for just one month. Although I do not take one month’s data to forecast the future, you can see, however, the power of managed futures in one’s portfolio during major market declines.


    Managed futures are part of a broader asset class called ‘alternative investments‘. I invite you to watch a short five minute video ‘What is an Alternative Investment‘ from my October 25, 2011 blog posting to better understand the asset class and why Gratke Wealth has used alternative investments in client portfolios for over ten-years now.

    Go here to watch the video.

    Text Below: October 14, 2011

    In recent months asset classes have begun to move in the same direction again. This has been especially true during these multi-hundred-point movements. In periods like this, much of the intended traditional diversification efforts within a portfolio do not work; simply put, many asset classes have declined together offering little or no downside risk protection during these market moves.

    Enter Managed Futures

    As we can see from the above graphic for the third quarter 2011, many assets classes fell significantly. Keep in mind, those figures are not annualized. One would have to increase those values by a fourfold factor to annualize. The top two lines in the above graphic represent two managed futures portfolios; the four lines below are commodities, US Stocks, REITs and International Stocks respectively.

    The table below reflects the recent performance of these asset classes in a tabular format.  Again we can see that ‘traditional’ asset allocation did not provide downside risk protection during the third quarter 2011.

    But had one’s portfolio included managed futures, the outcomes would have been much different.

    Historical Performance (As of 9/30/11)

    *Inception date August 26, 2010

    What we see of course, is that over the third quarter 2011, managed futures held up very well as compared to other asset classes.  The savvy reader will also know that historically commodities and REITs have offered downside protection and diversification. However, in today’s environment those asset classes DO NOT offer downside protection against traditional assets such as domestic and international stocks as they once did. This relationship was also true in the fourth quarter of 2008; the convergence of risk amongst many historically non-correlated asset classes such as REITs and commodities offering little protection during that time period.

    Managed Futures continue to offer a sound diversification strategy during major market trauma as we have recently experienced in Q3 2011.

    Source: Altegris Investments

    Similar articles you may enjoy:

    What is an ‘Alternative’ Investment?

    Managed Futures in the Portfolio; Why and Why Now?



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