Managed Futures: Portfolio Diversification ... - Dorman Trading

cmegroup.com
BENEFITS OF MANAGED FUTURES
CME CME Group Group Managed Futures Portfolio Diversification Opportunities
CME Group Managed Futures Portfolio Diversification Opportunities
By their very nature, managed futures
provide a diversified investment
opportunity. Trading advisors can
participate in more than 150 global
markets; from grains and gold to
currencies and stock indices. Many funds
In this example, the overall risk is reduced
The benefits of managed futures within a well-balanced portfolio include:
1. Potential to lower overall portfolio risk
2. Opportunity to enhance overall portfolio returns
3. Broad diversification opportunities
4. Opportunity to profit in a variety of economic environments
further diversify by using several trading
BENEFITS advisors with different trading OF approaches.
MANAGED FUTURES
BENEFITS OF MANAGED FUTURES
5. Limited losses due to a combination of flexibility and discipline
by almost 82 percent from –41.0 percent
to –7.5 percent and the return also
increases By By their their very almost very nature, 20 percent managed from futures
+7.4 The The benefits of of managed futures within a well-balanced a portfolio include:
By percent provide their very a to diversified a +8.9 nature, percent. managed investment
This futures is mainly The 1. 1. Potential benefits to of to lower managed overall futures portfolio within ris;k ris;k a well-balanced portfolio include:
provide due opportunity. to a the diversified lack Trading of correlation investment advisors and, can can in
some participate cases, negative over over 150 correlation 150 global global markets;
1.
between
2. Potential 2. Opportunity to lower to to enhance overall portfolio portfolio ris;k returns
opportunity. Trading advisors can
participate some from from grains of grains the and over portfolio and gold 150 gold global to components to currencies markets; in and and 2. 3. Opportunity 3. Broad diversification to enhance opportunities
portfolio returns
from the stock stock grains diversified indices. and Many gold portfolio. Many to funds currencies funds There further is and even diversify
3. 4. Broad 4. Ability diversification to to profit in in a variety opportunities
a of of economic environments
stock negative by by using indices. using several correlation Many trading funds between advisors further stocks diversify with with and
4. 5. Ability 5. Flexibility to profit and and in discipline a variety combine of economic to to limit environments
limit losses
by managed using several futures trading as the advisors two markets with move
independently from each other. 5. Flexibility and discipline combine to limit losses
CHART 4: OPTIMUM 4: PORTFOLIO MIX MIX (12/1985 – 02/2008) – CHART 4: OPTIMUM PORTFOLIO COMPARISON MIX OF (12/1985 A STOCKS – 02/2008) ONLY VS. DIVERSIFIED PORTFOLIO
STOCKS
ONLY ONLY
STOCKS
ONLY
33.3% 33.3%
Dow Dow Jones Jones
33.3%
Dow Jones
DIVERSIFIED
PORTFOLIO
DIVERSIFIED
PORTFOLIO
20% 20%
Managed Futures Futures
20%
Managed Futures
33.3% 33.3%
Nikkei Nikkei 225 225
33.3% 33.3%
MSCI MSCI World World
40% 40%
Stocks Stocks
40% 40%
Bonds Bonds
33.3%
33.3%
40%
40%
Nikkei 225
Correlation:
MSCI World
Stocks
Correlation:
Bonds
Dow Dow Jones Jones – Nikkei – Nikkei 225: 225: 0.42 0.42
Stocks Stocks – Managed – Futures: Futures: –0.05 –0.05
Correlation:
Dow Dow Jones Jones – MSCI – MSCI World: World: 0.81 0.81
Correlation:
Managed Futures Futures – Bonds: – Bonds: 0.23 0.23
Dow
MSCI
Jones
MSCI World
–
World
Nikkei
– Nikkei –
225:
Nikkei 225: 225:
0.42
0.67 0.67
Stocks
Bonds Bonds
– Managed
– Stocks: – Stocks:
Futures: –0.05
–0.07 –0.07
Dow Jones – MSCI World: 0.81
Managed Futures – Bonds: 0.23
MSCI World Managed – Nikkei futures: 225: CASAM CISDM 0.67 CTA Equal Weighted; Bonds: JP Morgan Bonds Government – Stocks: Bond Global; –0.07 Source: Bloomberg
ANNUAL RETURNS AND
MAX. DRAWDOWNS
10% 10% 7.4% 7.4%
10% 0% 0% 7.4%
0% –10% –10%
–10% –20% –20%
–20% –30% –30%
STOCKS
ONLY
STOCKS
ONLY
STOCKS
ONLY
–30% –40% –40%
–40% –41.0%
Annual –41.0% Annual Return Return
Annual Max. Max. Drawdown
Return
Max. Drawdown
8.9% 8.9%
8.9%
–7.5%
DIVERSIFIED
PORTFOLIO
–7.5%
DIVERSIFIED
PORTFOLIO
DIVERSIFIED
PORTFOLIO
2