Choosing a CTA ...
If you’ve decided to include Managed Futures in your investment portfolio, the next step is choosing the right mix of Commodity Trading Advisors to help achieve your investment objectives. Just as managed futures help diversify an investment portfolio, different CTA programs can provide another layer of diversity within the managed futures asset class.
With hundreds of CTAs available, however, selecting one or more can be a difficult task. So, when making your decision, here are some important things to consider.
Futures markets like grains, currencies, equity indexes and energy often have little correlation to each other. Choosing CTAs that trade in different markets is just one way to add diversification to your portfolio.
Another way to diversify within the managed futures asset class is to choose CTAs that employ different trading strategies.
Most CTAs are trend followers. These are technical traders who use computer programs to identify longer-term price trends. Other CTAs are more short-term, fundamental traders who forecast prices by analyzing supply and demand, and other market information.
Investing in managed futures allows investors to take advantage of both strategies.
Understandably, performance is what most investors look at first. However, a fund’s annual rate of return shouldn’t be the only measurement of a CTA’s worth.
A CTA with a track record (at least 3-5 years) of producing moderate returns can often be a better choice than a CTA with a single year of outstanding performance. Newer CTAs may not have undergone audits by the National Futures Association, or may not even fall under the NFA’s control.
Finally, a CTA’s drawdowns (representing the CTA’s largest historical loss in equity - from peak to valley) may be the most important piece of performance information to review. These documented swings in performance demonstrate a fund’s volatility and can help determine if the performance is in line with your tolerance for risk.
The bottom line is that choosing one or more CTAs can be a challenge. You can never do too much research, or have too much information. Thankfully, today there are websites, like IASG.com, that can help.
IASG helps provide investors with an extensive database of CTAs, the funds they manage and their performance, and the ability to review the programs based on commodity type, performance and strategy. IASG can even help you track the performance of CTAs, experiment with investment ideas before actually investing, and much, much more. If you are interested in learning more contact us directly at firstname.lastname@example.org or by calling 312-561-3145.
So, before choosing a commodity trading advisor, do your homework. You'll find a great deal of information that will help you choose advisors that are right for you, while diversifying your portfolio, and helping you to better meet your financial goals.