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Wednesday, 07 September 2011 22:47 |
When the markets are moving in a even manner, managed futures managers (or CTAs) capture value. Because CTAs can go both long and short the direction of the moves is not as important as the fact that trends exist. Thus, managed futures have tended to perform better given sustained moves in either direction, with larger volatility leading to larger returns.
Once you have the CTA or a CTA portfolio assembled, the importance of correlation is seen in yet another way.
Adding a CTA piece to your current and typical stocks and bonds portfolio can further increase return and reduce risk. Why? Because it is non correlated to traditional investments and other alternative investments.
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