The strategies seek to take advantage of price trends — up or down — and produce positive returns that offset declines elsewhere. Having some money committed to a managed futures strategy can lower a portfolio’s overall risk and potentially keep an investor from making a rash move they may regret later.
The managed futures strategy isn’t meant to be correlated with the performance of the stock market. This year has been one of broad declines for stocks and bonds, as the Federal Reserve has taken steps to clamp down on high inflation. It has also been a good one for Kung’s strategy. Managed futures exposure can help calm investors’ fears During periods of high volatility in the stock or bond markets, investors can find it difficult to stand firm. Time and again, the cycles of market pullbacks and recoveries have shown that most investors have been best off waiting through the cycles and even continuing to pour money in, rather than trying to time the market by waiting on the sidelines.
This is done by placing futures trades on “large bellwether instruments” to take advantage of price trends, Kung said, adding: “We do not have structural exposure to any market index.” A managed futures strategy typically holds cash on the sidelines. This means a fund manager might invest that cash outside the futures strategy — in long stock positions, for example.