Investors looking for exposure to commodities may choose to participate in managed futures funds. In these funds, one or more commodity trading advisers (CTAs) make the investment decisions.
As a group, such funds have had impressive risk-adjusted returns. Commonly organized as limited partnerships or trusts, managed futures funds often use leverage, which can boost returns to investors (or hurt returns, if strategies fail).
There are usually suitability standards for investors to meet but many investors can qualify for managed futures funds. These funds can go long or short so they can make money in up or down markets. They trade futures and forward contracts on financial instruments as well as physical commodities. Therefore, managed futures funds can be extremely flexible and responsive to changing market conditions.
Major brokerage firms offer such funds to clients. Managed futures funds are actively-managed so it’s vital to choose the right manager. You should look for CTAs who have a history of capturing upward moves yet still being good on the downside.
