Managed Futures and Commodities
At Cedrus Investments, we offer clients broad guidance as to each individual’s suitability for an asset allocation towards commodities, as well as providing in-depth research and offering expertise on the implementation of investment vehicles incorporating commodity exposure in a portfolio.
Managed futures can be a valuable part of an overall asset allocation plan; its purpose is to add portfolio diversification, reduce overall portfolio volatility, and achieve higher overall portfolio performance over time when compared to traditional investment portfolios. A study by the Chicago Mercantile Exchange (CME) concluded that a portfolio with 20% managed futures has less risk than a portfolio with only stocks and bonds.
Why Invest In Managed Futures?
Managed futures offer four distinct advantages:
- Reduce portfolio volatility risk;
- Potential for enhanced portfolio returns;
- Ability to profit in any economic environment;
- Ease of global diversification
Commodities are an important and potentially rewarding asset class to diversify your investment portfolio beyond the conventional and most popular asset classes: stocks and bonds. Commodities can be used as a strategic hedge to improve the risk and return profiles of different portfolios owing to their historical tendency of behaving in an uncorrelated manner with the broader market relative to more traditional financial assets. In contrast with traditional asset classes like stocks and bonds, which are closely correlated to each other and tend to be more sensitive to the movements of financial indicators, commodities have low to negative correlation with the overall financial markets, making them a common tool to mitigate the volatility of portfolio performance. Moreover, commodities are often characterized as a defensive asset class. For example, in an unanticipated inflationary environment, commodities tend to outperform conventional assets because investors are inclined to move away from paper assets and flock towards tangibles such as commodities.