Personal Investment in Alternatives---Portfolio Diversification

With so many global financial risks building, equity markets continue to be in danger of the next big bear trend. Treasuries provide an attractive alternative during these times but there is a product I'd like to talk about that has asimilar low risk and substantially higher returns. This product is managed futures, which are funds managed by commodities trading advisors (CTAs). These products have performed well in every bear market for the last thirty years. Even in bull markets managed futures are a great way to increase risk-adjusted returns by adding diversification to your portfolio due to their low correlation to equities.


Here are ten compelling reasons to consider adding managed futures to your portfolio according to the educational material from CMEGroup:


1. Diversify beyond the traditional asset classes: Managed Futures are an alternative asset class that has achieved strong performance in both up and down markets, exhibiting low correlation to traditional asset classes, such as stocks, bonds, cash and real estate.


2. Reduce overall portfolio volatility: In general, as one asset class goes up, some other asset class goesdown. Managed Futures invest across a broad spectrum of asset classes with the goal of achieving solid long-term returns.


3. Increase returns and reduce volatility: Managed Futures, as well as commodities, when used in conjunction with traditional asset classes, may reduce risk, while at the same time potentially increasing returns.


4. Returns evident in any kind of economic environment: Managed Futures may generate returns in bull and bear markets, boasting solid long-term track records despite economic downturns.


5. Strong performance during stock market declines: Managed Futures may do well in down markets.


6. Successful institutions use them: Pension Plan Sponsors, Endowments and Foundations have long used Managed Futures to generate returns in excess of the S&P 500.


7. Commodity Trade Advisors (CTAs) and Pool Operators (CPOs) have access to a wide variety of global futures products that are liquid and transparent: There are more than 150 liquid futures products across the globe, including stock indexes, fixed income, energies, metals, and agricultural products.


8. CTA/CPO community is regulated and trades on regulated futures exchanges: Trading in a regulated marketplace builds the credibility and trustworthiness of the CTA/CPO community.


9. Risk Management and Clearing: Futures Clearinghouse institutes some of the most sophisticated risk management practices in the financial world. For more than 100 years, Futures Clearinghouse has provided services that substantially mitigate the risk of clearing member failure. Futures Clearinghouse has provided the resources to ensure the performance of every contract on our exchanges for more than a century.


10. Overall industry growth has been exceptional: In the last 30 years, assets under management for the Managed Futures industry have grown 1000 fold.


For more information on managed funds, feel free to visit: www.ibtrade.com