Managed Futures and Their Role in Investment Portfolios (The by Don Chance

By Don Chance

One of many many merits controlled futures provide is that their returns have low correlations with the returns of different conventional asset classes-even notwithstanding they could entail major bills. This monograph presents an summary of the undefined, discusses the benefits and downsides of controlled futures, studies their historic functionality checklist, provides a mode for comparing their functionality in a portfolio, and lays out tips to determine a controlled futures application.

Show description

Read or Download Managed Futures and Their Role in Investment Portfolios (The Research Foundation of AIMR and Blackwell Series in Finance) PDF

Best corporate finance books

International Private Equity

Bringing a distinct joint practitioner and educational point of view to the subject, this is often the one to be had textual content on deepest fairness actually foreign in concentration. Examples are drawn from Europe the center East, Africa and the US with significant case reports from a variety of enterprise sectors, from the distinguished choice of the London enterprise School’s Coller Institute of personal fairness.

Engineering economy

"Engineering economic system, seventh Edition", offers undergraduate scholars and training pros with a superb practise within the monetary realizing of engineering difficulties and initiatives, in addition to the strategies wanted for comparing and making sound financial judgements. details on expense estimation, depreciation, and taxes has been up-to-date to comply to new tax legislation.

Additional resources for Managed Futures and Their Role in Investment Portfolios (The Research Foundation of AIMR and Blackwell Series in Finance)

Example text

Expenses were inversely related to pool size; pools of less than $500,000 averaged more than 50 percent, whereas pools of more than $10 million averaged about 20 percent. When first confronted with these figures, most individuals are shocked. Managed futures trading does have high fees, but there are reasons. One is that most managed futures arrangements are based on relatively small amounts of invested funds. For example, in Cornew's study, the largest commodity pool was only $30 million. In the Irwin-Brorsen (1985) study of 84 public futures funds, the average size of the funds in 1984 was only about $5 million.

With A, P, MF, and BM representing various excess returns, then A + MF, A + BM, P + MF and P + BM represent the returns from the combinations indicated in Table 8. Now look at the value added in basis points (bps) by including managed futures. The overall portfolio had an alpha of -26 bps, but the active portfolio had an alpha of -92 bps. Thus, the managed futures program added 66 bps of value. Obviously, the active portfolio performed poorly, and the managed futures program reduced this poor performance.

000 Notes: Returns and statistics were calculated from actual market values with the use of a spreadsheet. Statistics shown here may diier slightly kom those computed by using the rounded-off returns displayed here. aReturn to portfolio consisting of 80 percent active and 20 percent managed futures. b ~ e t u r to n portfolio consisting of 80 percent active and 20 percent managed futures benchmark. 'Return to portfolio consisting of 80 percent passive and 20 percent managed futures. d ~ e t u r to n portfolio consisting of 80 percent passive and 20 percent managed futures benchmark March June September December March June September December R Returns Quarter + Managed Active TABLE 8.

Download PDF sample

Rated 4.01 of 5 – based on 42 votes