The benefits of investing in managed futures are as varied as the global markets they trade in. IN a broad sense though, the benefits can be highlighted within three areas:
Reduced Portfolio Volatility Risk One reason that investors choose to add managed futures to a portfolio is that by doing so it may provide diversification and thus decrease portfolio volatility risk. This is possible because many studies have shown that managed futures tend to be non-correlated to stocks and bonds. On of the key tenets of Modern Portfolio Theory by Nobel Prize economist Dr. Harry M. Markowitz, is that more efficient investment portfolios can be created by diversifying among asset classes with low to negative correlations.
Potential for Enhanced Portfolio Returns Backed up by a body of work by Dr. John Lintner of Harvard University , it was shown that managed futures may not only decrease portfolio risk but enhance portfolio performance. Dr. 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."
Ability to Profit in Any Economic Environment By trading in global markets across such varied elements as physical commodities, to foreign currencies, to stock indexes, futures provide an array of opportunities.
While there can be apparent benefits to using managed futures, the risks are equally abundant. While registered professionals manage these funds, market risk is ever-present. Investing in futures and foreign exchange involves substantial risk and is not suitable for all investors.