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What Are Managed Futures?
The term Managed Futures describes an industry made up of
professional money managers known as commodity trading advisors (CTA's). These
trading advisors manage client assets on a discretionary basis using global
futures markets as an investment medium. Trading advisors take positions based
on expected profit potential.
Managed Futures are an alternative investment asset class that
allows investors to simultaneously participate in multiple global market
sectors such as currencies, energies, metals, short and long term interest
rates, domestic and international stock indices and traditional commodities.
Managed Futures can be a valuable part of an overall asset
allocation plan; its purpose is to add portfolio diversification, reduce
overall portfolio volatility, and achieve higher overall portfolio performance
over time when compared to traditional investment portfolios alone. A study by
the Chicago Mercantile Exchange (CME) concluded that a portfolio with 20%
Managed Futures has less risk than a portfolio of Stocks and
Bonds alone.
Why Invest In Managed Futures?
Managed Futures offer four distinct advantages:
- Reduced Portfolio Volatility Risk
- Potential for Enhanced Portfolio Returns
- Ability to Profit in Any Economic Environment
- Ease of Global Diversification
Read the
Chicago Board of Trade's (CBOT) publication outlining these advantages [PDF]
This chart compares the worst case declines of the, S&P 500,
NASDAQ, and International Stocks with the Barclay CTA Index performance during
the same time period. The worst case decline of the Barclay CTA Index is on the
left.
As you can see, the performance of Managed Futures is independent of
other asset class performance. Diversification among non-correlated asset
classes is paramount to responsible investment. No investment is safe from
loss, and over-exposure to any one asset class can lead to increased risk and
reduced returns.
One of the most uncorrelated and independent investments versus
stocks are professionally managed futures. The value of professionally managed
futures was thoroughly researched by Dr. John Lintner of Harvard University in
a 1983 landmark study, “The Potential Role of Managed Futures Accounts in
Portfolios of Stocks and Bonds.”
Lintner wrote that “the combined portfolios of stocks (or stocks and
bonds) after including judicious investments… in leveraged managed futures
accounts show substantially less risk at every possible level of expected
return than portfolios of stocks (or stocks and bonds) alone.” Lintner
specifically showed how managed futures can decrease portfolio risk, while
simultaneously enhancing overall portfolio performance.
Read the
Vision L.P. booklet MODERN PORTFOLIO THEORY to learn more about asset class
diversification [PDF].
Why Choose Paragon Investments, Inc.?
Our Managed Futures Specialists research each fund's performance to
select our Paragon Preferred funds. To become a Paragon Preferred fund, the
fund must have a substantial diversifying effect on a portfolio of stocks and
bonds. We judge the fund's performance history during time periods of declining
stock prices, stagnant stock prices, and rising stock prices. Granted, past
performance is no guarantee of future results, but by judging the CTA's success
during all types of stock market performance we can gauge the effectiveness of
the CTA's strategy in reducing portfolio volatility and enhancing portfolio
returns.
As an independent Introducing Broker, Paragon Investments, Inc. has
access to multiple FCM-offered funds. Currently, we offer funds from Vision
L.P., ADM Investment Services, and Man Financial. This diversity of fund
selection ensures we offer an appropriate fund for every qualified investor,
with affordable minimums and outstanding performance.
Our Current Fund Offerings
Paragon Investments, Inc. currently has offerings from three
separate FCM's, with a total of over 250 available funds to choose from.
Additionally, we can provide access to virtually any CTA fund, even if it is
not a current offering from our providing FCM's. Contact a Paragon
representative today to learn about our available funds.
For More Information
Complete our Managed Futures services inquiry form or contact a Paragon Investments, Inc. Managed Futures Specialist
at 888-452-8751 or managedfutures@piitrader.com.
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