Managed Futures is a term used to encompass an investment vehicle made up of professional money managers known as commodity trading advisors (CTA). These money managers use the global futures, options, and foreign exchange markets as their investment medium. Accounts utilized for Managed Futures are like any other brokerage account that is established to trade in the futures or forward markets. Responsibility for trading is delegated to a trading advisor or group of advisors, which have discretionary trading authority over the account.

According to Barclay Hedge, assets under management grew from $310 million in 1980 to over $206 billion by 2008. When a non-correlated investment in managed futures is added to a portfolio of stocks and bonds, the overall volatility risk of the portfolio may be reduced with the potential for enhanced returns.

Investment Advantages

Alternative investments such as futures and options of futures have important advantages over other investment vehicles.

These alternative investments are liquid and global. Barring extreme market conditions, many futures and forward markets are highly liquid and some trade 24 hours a day around the world.

Many alternative investment programs offer low correlation to traditional stock and bond portfolios.

An equivalent amount of money can control significantly more value in futures and options on futures, than in stocks. This is called leverage, which can be used without interest expense in futures and options on futures, but is expensive in stocks. It is the availability of leverage that creates the perception of volatility, and it is primarily the use of leverage that creates the increased risks associated with trading futures and options on futures. However, leverage can also be a valuable tool. It is the controlled use of leverage and prudent risk management that can generate attractive risk-adjusted returns.

Futures accounts can earn interest. Unlike traditional investments, investors are not required to borrow money in order to obtain leverage. Instead, margin deposits are maintained in cash and cash equivalents, such as U.S. Treasury bills, and earn interest. In fact, interest may be earned on most of the investor's available assets.

Alternative investments offer global diversification. Futures and forward contracts are traded in many countries, which makes it possible to spread risk and participate in potential profit opportunities around the world. For example, an investor's portfolio can include global interest rates, stock indices and currencies, as well as energy, precious metals, meats and grains.

Most alternative investments such as futures and options on futures can be traded in both rising and falling markets. Because there is no prohibition against short sales in futures and forward markets, it is just as easy to establish a short position with the objective of profiting from declining prices as it is to establish a long position with the objective of profiting from rising prices. It is this potential to make money, regardless of market direction, that makes managed futures particularly attractive to sophisticated investors. Of course, if prices go higher while an investor has a short position, he or she will lose money until the short position is exited and vice versa.

Investment Risks

Alternative investments such as futures and options on futures: Past results of Zenith Resources trading programs are not necessarily indicative of future performance and the performance can be volatile.
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