Have you heard the term “managed futures” and found yourself a bit confused? As with many financial terms, managed futures can be intimidating at first. However, once you start working with them, they won’t seem so bad. “Managed futures” simply refers to a professional investor or wealth manager who uses futures as part of his or her investment strategy. These days, many professional wealth managers have diversified away from traditional stocks and bonds.
Futures, by the way, are a type of contract in which a buyer and seller enter an agreement, exchanging money now, but not settling the contract until in the future. For example, you could buy an oil future, paying money to the broker or seller now. The oil will then be delivered in the future at an agreed upon time. These days, however, oil most likely won’t be delivered, the contract will instead be settled in cash.
If you’re still confused by what futures are, we recommend you take a moment to research them. If you’re already familiar with futures, but want to learn more about managed future funds, read on! We’ll fill you in on these unique managed funds and how you can use them to diversify your portfolio!
Why Mutual Funds Are Investing In Futures
These days, managed futures mutual funds are becoming all the more common as mutual funds look to diversify and also increase their returns through investing in futures. Futures allow for quick and easy diversification. For one, they allow firms to go “short”. That is, invest in a way that allows them to profit off of dropping market prices, without taking on as much risks as shorting actual stocks (basically, shorting stocks exposes you to unlimited risks).
One of the many big investment firms that now actively engages in futures investing through their mutual funds and other investment vehicles is AQR. AQR managed futures are a popular and great option for people looking to invest in futures without wanting to manage them yourself. AQR managed futures funds are interesting because the company has both short and long term futures. Further, the company can go long, expecting prices to rise, and can go short, expecting prices to drop. They play both ways. This means they can produce returns in any market, just so long as they are right in their predictions.
Why you should use managed future funds
Fact is, not every investor has the time to handle all of their investments. If you are trying to diversify your holdings, it can be difficult to manage multiple financial investment vehicles. For example, trying to manage a portfolio filled with stocks, options, bonds, futures, and commodities is going to be next to impossible for anyone. Even a single professional investor working full time would have trouble managing all of these different assets.
Futures require a much different investment strategy than stocks and stocks require a much different investment strategy than bonds. In fact, no two investment vehicles are identical. This means you have to build up your knowledge base to be high enough to support investing in all of these different types of investment vehicles, at least if you want to manage all of these assets yourself.
It might be that you want to outsource some of your investing, especially when it comes to investing in financial vehicles you are less familiar with. Let’s say you’ve grown quite comfortable managing your stock portfolio and are generating solid returns. You know you need to diversify, however. You’ve read up on futures and they sound really interesting, but you simply lack the time to properly manage them. Family, careers, life gets in the way. So what to do? Invest in managed futures etf or managed futures funds!
By using a “managed” fund, you’ll be able to outsource some of your investing. A professional investor will take a chunk of your money and invest. You’ll get to to reap the rewards of these investments. You’ll have to pay the fund manager a cut of what you invest and earn, of course. For this reason, it is very important to make sure you read through the fees and associated costs very closely.
Either way, a managed future fund is a great way for you to tap into the earning potential of futures without having to dead with the headache of managing a futures portfolio.