Managed futures are operated by licensed Commodity Trading Advisors, or CTAs, who are regulated in the United States by the Commodity Futures Trading Commission and the National Futures Association. Commodity trading advisors (CTAs) are asset managers who follow a set of systematic investment strategies. Essentially, they are the operators of managed futures accounts and are directly responsible for the actual trading. They originally operated predominantly in commodities markets, but today invest in any liquid futures market. There are approximately 1000 CTAs registered with the National Futures Association (NFA), the self-regulatory organization for futures and futures options markets. Because of the direct involvement of the CTA in manage futures, choosing the appropriate CTA may be critical in performance and or diversification characteristics.
The two major types of advisors are technical traders and fundamental traders. Technical traders may use computer software programs to follow price trends and perform quantitative analysis. Fundamental traders forecast prices by analysis of supply and demand factors and other market information. Some advisors may use a combination of these two techniques for their managed futures programs.
Some CTAs are compensated on a performance fee basis, usually 15% to 30% of profits. Other CTAs are compensated by charging a per trade cost whenever the account or fund trades. Most CTAs also charge a management fee per year, usually between 1% to 2% of the account size.