Q: What's been responsible for growth in managed futures trading?
A: Several factors have impacted growth: First, as traditional markets have become increasingly volatile - and vulnerable to often unexpected events -- institutional money management and other sophisticated investors have sought to more effectively manage overall portfolio risk through diversification. Indeed, risk and diversification are major concerns in today's market environment; Secondly, many investors are seeking higher rates of return. A number of studies indicate that a portfolio that includes managed futures can potentially yield appreciably higher and more stable returns over time than a portfolio that includes only stocks and bonds. The same evidence indicates this can be achieved without added portfolio risk.
Still another factor in the growth of managed futures has been the tremendous broadening of futures on a global basis to encompass stock indexes, debt instruments, international currencies, and options as well as conventional commodities including metals and energy. These new investment vehicles have created new categories for profit potential as well as a mechanism to to lower overall portfolio risk. Please be advised that trading futures and options involves substantial risk of loss and is not suitable for all investors.
Q: How are profitability, volatility and risk affected when managed futures are included in an investment portfolio?
A: Harvard Business School Professor John E. Lintner found that including managed futures in a portfolio have the potential to "reduce volatility while enhancing return." And those portfolios "have substantially less risk at every possible level of return than portfolios of stocks, or stocks and bonds." More importantly, over the past several decades Lintner's and other academic studies conclusions concerning the performance enhancement and risk reduction benefits inherent in managed futures have been clearly demonstrated.
Q: What is a CTA managed futures account?
A: A CTA managed futures account is one where a registered Commodity Trading Advisor ("CTA") is given responsibility to make all trading decisions. This authority is delegated by the account holder to the CTA through a limited power of attorney which may be withdrawn at any time.
Q: How can I track the performance in my managed account?
A: All accounts held at Vision Financial Markets ("Vision"), GreenWave's Futures Commission Merchant, have total transparency. Clients have 24/7 access to their accounts via a password protected website disclosing all trading activity and account balances. Funds can be liquid and accessible within one week's notice. You may also call your GreenWave Managed Futures Specialist who receives a daily equity run detailing all your open positions, netting out profit and losses, showing the exact daily balance in your account.
Whether you call or not, a purchase and sales statement (P/S Statement) automatically will be sent to you on every single trade, showing the date and price entered; when you exit a trade, the date, price, and net profit or loss on the trade, a summary of all transactions showing their results are posted on the web via your password protected account. Instead of having your statements post office mailed, you can select having your P/S statements e-mailed directly to you. Therefore, even without calling, you will have a written, detailed breakdown of the CTA's transactions and performance in your account.
Q: How does my CTA get paid for managing my account?
A: Most CTAs receive an on-going management fee on the account balance in the range of 2% per year, whether the account is profitable or not, and incentive fee that varies between 20 and 25% depending on your CTA. These fees are usually paid either monthly or quarterly which is detailed in each CTA's Disclosure Document. However, Vision has negotiated with the majority of its CTAs, which many times allows GreenWave to offer reduced on-going fees.
The source of income for the majority of the recommended CTAs is an incentive fee that can only be earned by producing on-going new profits for an account net of all costs.
Q: How accessible are my funds in a managed account?
A: Although you’re strongly urged to view your managed account as a long-term investment, you may close your account and access your funds at any time.
Q: Are there any tax benefits to investing in managed futures?
A: Yes. According to the Tax Act of 1981, short-term profits in commodities are treated as 60% long-term and 40% short-term. On the other hand, short-term trading profits in stocks are treated as 100% short-term. A short-term investment is one that is held for less than one year. This favorable tax treatment in commodities can translate to investors in upper tax brackets, saving as much as 30% on taxes in short-term gains on commodities versus stocks.
Q: Where is money kept?
A: Client's assets are strictly held in only Customer Segregated Accounts by Vision. Vision is a strongly capitalized diversified group of affiliated companies that offer commodities brokerage and clearing services, securities brokerage and clearing asset management, Commodity Trading Advisor selection and private investment funds. Since its inception, Vision has maintained substantially more regulatory capital than is required to maintain its customer equity. Vision is a registered Futures Commission Merchant ("FCM") with the Commodity Futures Trading Commission as well as a Commodity Pool Operator. Vision is also a clearing member of the Chicago Mercantile Exchange ("CME") and the Chicago Board of Trade ("CBOT") collectively known since their merger as the CME Group. In addition, Vision enjoys clearing status at CME Clearing, the world’s largest derivatives clearing organization.
The CME Group states in their financial safeguard brochure, "the CME clearing financial safeguard system provides unparalleled safeguards for the protection and benefits of all participants in markets cleared by CME clearing." In the 161 year history of the CME and its predecessor organization, there has never been a failure of a clearing member resulting in a loss of customer funds.
Additionally, Vision is a clearing member of The Options Clearing Corporation ("OCC"), the largest clearing organization in the world for options, and the Depository Trust & Clearing Corporation ("DTCC"), which provides custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories.
Q: Can I use retirement funds in a managed account?
A: Absolutely. You can participate in managed futures using retirement monies from a variety of of qualified retirement plans including IRAs, trusts and pensions.
Q: How do I open a managed account?
A: Before opening a managed account, you must be supplied with a copy of the CTA's Disclosure Document. Read it carefully before you invest. Go over questions your may have with your Managed Futures Specialist. After any questions you may have are answered, have your Managed Futures Specialist help you fill out the CTA Management Agreement and Customer Agreement Forms.
TRADING FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.