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Consider A CTA Managed Fund For Balanced Asset Allocation

Consider A CTA Managed Fund For Balanced Asset Allocation

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03/18/2014

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By Dwayne Strocen
Consider A CTA Managed Fund For Balanced Asset Allocation

There are many investment strategies for both the novice and sophisticated investor. The CTA managed fund has been overlooked until recently. Now the top performing investments are managed by CTA's and you should consider including these in your portfolio.

You might be wondering what a CTA is. A CTA is a Portfolio Manager for derivative products such as foreign exchange, commodities or futures. If you're familiar with traditional mutual funds or hedge funds, you'll know the investment decisions are made by a specialist in stocks or bonds. These are also called equity and fixed income products.

An equity fund is managed by an equity Portfolio Manager known as a CFA and a bond fund is managed by a fixed income Portfolio Manager also a CFA. Their exists a third type of Portfolio Manager and that is one responsible for managing a fund which is invested in products like currency, carbon emissions, precious metals, agriculture products and others. These Portfolio Managers are known as CTAs and they manage CTA funds sometimes known as a Managed Futures Fund.

Despite the obvious, each investment style has its own unique characteristics. For example, a traditional equity investor only makes money when the stock market is rising. They lose money during a falling or bear market. Wouldn't it be fantastic to win no matter which direction the market went. Well that is exactly what happens in a CTA fund. The CTA can buy or sell at random. We call this being "long" or "short". When long, you're betting the market is going up and when short, you're betting the market is falling. A CTA makes money no matter which direction prices are headed.

Now that you know the basics, lets look at why CTA funds have out performed equity and bond funds. Since September 2008 the wall street induced sub-prime mortgage fiasco has caused stock prices to plummet. If you held an equity mutual fund or a stock portfolio of your own, you will have lost money. In fact since Sept 1, 2008 the Dow Jones Industrial Average has lost 20.36 percent. According to the Managed Futures CTA database, the average CTA Fund YTD ROR (Rate of Return) to June 2009 is +2.14 percent. That\u2019s a whopping difference of 22.50 percent. These funds are definitely worth looking at.

A major advantage is the ability to trade the underlying commodity product. Why buy a company that's involved in oil extraction when you can buy the oil itself. The reason why stock market investing becomes difficult, is the many different factors that come into play. There is the ability of management, economic pressure, competitive pressure, union demands, changing consumer habits and a host of other factors that determine the profitability of a company.

A CTA fund has none of these issues to contend with. Investors who purchase Aluminum or High Grade Copper on the New York Mercantile Exchange are affected only by issues of Supply And Demand. During economic periods of growth, prices rise and during periods of recession, prices fall. So while your

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