Portfolio investment opportunities in managed futures

63 Pages·2013·16.297 MB·English

by  Darst, David M

Wiley RealTime Finance
Portfolio Investment Opportunities in
Managed
Futures

by David M. Darst
What’s Inside:
Assess the advantages and risks
of managed futures
Select risk management
strategies
Evaluate investment performance
and correlation
Analyze managed futures performance
during market dislocations

Portfolio Investment
Opportunities in
MANAGED
FUTURES
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Portfolio Investment
Opportunities in
MANAGED
FUTURES
David M. Darst, CFA
Cover image: <INSERT NAME>
Cover design: Michael Freeland
Copyright © 2013 by David M. Darst. All rights reserved.
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ISBN 978-1-118-50297-6 (ePDF)
ISBN 978-1-118-50298-3 (Mobi)
ISBN 978-1-118-50294-5 (ePub)
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
Contents
About the Author vii
Introduction ix
1: Select Investment Advantages and Potential Risks of
Managed Futures 1
Historical Background on Futures and Managed Futures 1
Distinguishing between Physical Commodities, Futures,
and Managed Futures 2
Select Advantages of Managed Futures 3
Potential Investment Risks of Managed Futures Funds 5
Placing Managed Futures in an Investment Context 6
Essential Differences between Managed Futures
and Other Asset Classes 8
Select Risk Management Strategies Pursued by
Managed Futures Advisers 9
Special Considerations Associated with Managed
Futures Funds 10
Fees and Expenses Associated with Managed
Futures Funds 11
Investment Approaches of Managed Futures Funds 12
Select Insights into Managed Futures Returns Patterns 13
Managed Futures Funds Compared with Hedge Funds 15
Trend Characteristics and Underlying Drivers of
Managed Futures 16
Evolution of the Futures Markets 16
Actively Traded Futures and Options Contracts
in the United States 16
v
vi Contents
2: Summary of Managed Futures Investment Performance
and Correlation 21
Select Managed Futures Indices’ Performance 21
Managed Futures Returns during Financial Market
Dislocations 25
The Barclay CTA Index and Survivorship Bias 26
Patterns of Managed Futures Returns 27
The CISDM CTA Equal-Weighted Index 32
Analysis of Select Asset Class Returns 35
3: Overview of the Investment Landscape 39
Global Futures Exchanges and Clearinghouses 41
4: Glossary of Indexes 45
5: Select Information Sources 49
Acknowledgments 51
About the Author
David M. Darst, CFA, is a Managing Director and
Chief Investment Strategist of Morgan Stanley
Wealth Management with responsibility for asset
allocation and investment strategy, and was the
founding president of the Morgan Stanley Invest-
ment Group. He joined Morgan Stanley in 1996
from Goldman Sachs, where he held senior man-
agement posts within the Equities Division and
earlier, for six years as Resident Manager of their
Private Bank in Zurich.
David is the author of seven books: The Complete Bond Book (McGraw-
Hill, 1975); The Handbook of the Bond and Money Markets (McGraw-Hill,
1981); The Art of Asset Allocation, Second Edition (McGraw-Hill, 2008);
Mastering the Art of Asset Allocation (McGraw-Hill, 2006); Benjamin
Graham on Investing (McGraw-Hill, 2009); and The Little Book that Saves
Your Assets (John Wiley & Sons, 2008), which has ranked on the bestseller
lists of the New York Times and BusinessWeek. His fi nancial works have
been translated into Chinese, Japanese, Russian, German, Korean, Italian,
Indonesian, Norwegian, and Vietnamese. In 2012, Seapoint Books published
David’s seventh book, Voyager 3, which contains his creative writing.
David appears frequently on CNBC, Bloomberg, FOX, PBS, and other
television channels, and has contributed numerous articles to Barron’s, Eur-
omoney, The Money Manager, Forbes.com, The Yale Economic Review, and
other publications. He broadcasts and writes extensively on asset allocation in
the fi rm’s biweekly Investment Strategy and Asset Allocation Commentary and
in the Morgan Stanley Smith Barney monthly publication, Asset Allocation and
Investment Strategy Digest, the predecessors of which he launched in 1997.
David graduated from Phillips Exeter Academy, was awarded a BA
degree in economics from Yale University, and earned his MBA from Harvard
Business School. David has lectured widely at Wharton, Columbia, INSEAD,
and New York University business schools, and for nine years, he served as
a visiting faculty member at Yale College, Yale School of Management, and
Harvard Business School. David is a CFA Charterholder and a member of
the New York Society of Security Analysts and the CFA Institute.
vii