In terms of making an investment that’s not in sync with the stock market while still battling market volatility, managed futures are looking like one of the diversified investor’s weapons of choice. Their biggest strengths come from an ability to thrive in all sorts of market conditions, divergence from the performance of more traditional investments, and the management of Commodity Trade Advisor’s whose strategies hedge risk.
As equities continuously suffer the wrath of unfortunate global economic health, we find ourselves in the optimum environment for alternative investing. Alan Reid, CEO of investment advisory firm Forward, says it best (and simplest) with, “managed futures strategies have a record of zigging when equity markets zag”. And he has the data to back it up.
A recent report produced by Forward plainly demonstrates managed futures immense lack of correlation by looking at the performance of the Barclay’s CTA, an index measuring the performance of Commodity Trading Advisors (managed futures specialists). During the first few years of the new millennium while the dot-com bust wrought devastation upon the stock markets, the Barclay CTA continued to deliver positive returns.
According to Forward’s report, over a 32-year period ending December 31, 2011, the CTA Index gained 5.21 percent annually, while the S&P 500 saw average gains of only 0.31 percent. During the last two major financial crises, the gains of the CTA Index remained in the double-digits, while those of the S&P hit negatives. How’s that for all weather investment?
Now more than ever, with global economic growth in question and strong market volatility threatening confidence in stocks, investors should be focusing on playing defense. And what better way to do that than with an alternative investment that’s past performance has demonstrated it clearly zigging when the equities markets zag?
Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.