Managed Futures

Portfolio Diversification Opportunities

Learn More About Managed Futures

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Orion Futures Group, Inc. is dedicated to offering its clients and prospective clients diverse investment products. Whether you are an individual speculator or a business looking to hedge its inventory, you can be assured of our best efforts in the execution and handling of your Futures and Options orders. If you are looking for greater ways to diversify an equity and/or bond portfolio, we are experienced individuals and are able to assist you. By incorporating Futures and Options in your portfolio, you can balance the overall risk and volatility, which can stabilize investment returns and potentially help you reach your short and long term investment objectives. Please be advised that trading futures and options involves substantial risk of loss and is not suitable for all investors. There are no guarantees of profit no matter who is managing your money. An investor must read and understand the Commodity Trading Advisors current disclosure document before investing. Past performance is not necessarily indicative of future results.

At Orion Futures Group, Inc. we believe very strongly that one of the best ways to accomplish these goals is through the use of Professionally Managed Futures. Managed Futures have been shown to potentially provide an investor with greater diversification while at the same time attempting to balance overall risk and volatility.

The following information will introduce you to Professionally Managed Futures and provide you with more in depth analysis of the potential value of professional management, characteristics of Managed Futures, and the reasons for its growth as a major investment vehicle for any portfolio.

What are Managed Futures?

The term managed futures describes an industry made up of professional money managers known as commodity trading advisors (CTAs). These trading advisors manage client assets on a discretionary basis using global futures markets as an investment medium. Trading advisors take positions based on expected profit potential. Investment management professionals have been using managed futures for more than 20 years. More recently, institutional investors such as corporate and public pension funds, endowments and trusts, and banks have made managed futures part of a well-diversified portfolio. The growing use of managed futures by these investors can be attributed to the increased institutional use of the futures markets for risk-management programs. Additionally, investors want greater diversity in their portfolios. They seek to increase portfolio exposure to international investments and non-financial sectors, an objective that is accomplished through the use of global futures markets.

Managed futures, by their very nature, are a diversified investment opportunity. Trading advisors have the ability to trade in over 50 different markets worldwide. Many funds further diversify by using several trading advisors with different trading approaches.

The benefits of managed futures within a well balanced portfolio include:

  1. Potential opportunity to balance portfolio volatility risk.
    This balancing of the portfolio is possible because of the low to slightly negative correlation of managed futures with equities and bonds. (One of the key tenets of Modern Portfolio Theory, as developed by the Nobel Prize economist Dr. Harry M. Markowitz, is that more efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations)
  2. Potential to enhanced portfolio. Please be advised that these studies were conducted in academia and as such, the results are not based on actual trading.
    Adding managed futures to a traditional portfolio improves overall investment diversification. This is substantiated by an extensive bank of academic research, beginning with the landmark study of Dr. John Lintner of Harvard University, in which he wrote that "the combined portfolios of stocks (or stocks and bonds) after including judicious investments in leveraged managed futures accounts show substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds) alone."
  3. Potential ability to profit in any economic environment.
    Managed futures trading advisors can take advantage of price trends. They can buy futures positions in anticipation of a rising market or sell futures positions if they anticipate a falling market. Keep in mind that one can make or lose money in both rising and falling markets. For example, during periods of hyperinflation, hard commodities such as gold, silver, oil, grains, and livestock tend to do well, as do the major world currencies. During deflationary times, futures provide an opportunity to profit by selling into a declining market with the expectation of buying, or closing out the position, at a lower price. Trading advisors can even use strategies employing options on futures contracts that allow for profit potential in flat or neutral markets. 
  4. Opportunity to participate in global markets.
    Managed futures accounts can participate in at least 50 different markets worldwide, including stock indexes, financial instruments, agricultural and tropical products, precious and nonferrous metals, currencies, and energy products. Trading advisors thus have opportunity for profit potential and risk reduction among a broad array of non- correlated markets.

These four benefits show that suitable investors with a high degree of risk tolerance may want to consider professionally managed futures.

The Value of Professional Management

Professional Management brings to futures benefits similar to those experienced with mutual funds and investment advisors. These benefits include:

  • Full-time dedication to markets
  • A disciplined trading approach
  • Money management techniques that seek to control losses and protect profits
  • Strategies that attempt to balance risk and reward

Characteristics of Managed Futures

  • Returns are usually independent of U.S. stock and bond market trends
  • Offer opportunities to participate in virtually all sectors of the world economy
  • Have the flexibility to potentially profit in rising markets as well as declining markets; the risk of loss is equal
  • Unlike stocks, managed futures have the potential to perform as well in inflationary periods as they can in deflationary periods
  • With a trend towards globalization of world economies, the viability of managed futures may take on greater significance

Reasons for the Growth of Managed Futures

A number of factors have been responsible for the growth in managed futures trading:

  • Sophisticated investors have sought more effective methods of diversification. A number of studies indicate a portfolio including managed futures may yield more stable returns over a period of time relative to portfolios including only stocks and bonds.
  • The expansion of futures to encompass stock indexes, debt instruments, currencies, and options as well as conventional commodities has created new categories of potential profit opportunities. The global nature of today's futures markets also has expanded the scope of investment possibilities.
  • Studies published by the Chicago Mercantile Exchange (CME) indicated that Managed futures accounts may be more profitable on the average than accounts that individuals trade on their own.

Characteristics of Managed Futures Investors

Investors in professionally managed futures share common attributes and goals:

  • They are changing with the times and have broadened their selection of investment alternatives to take potential advantage of global opportunities.
  • They seek the expertise of professional money managers.
  • They have recognized managed futures as a legitimate investment and are aware of its features and potential benefits and inherent risks.
  • They have chosen to invest in a managed futures program because of its ability to complement their overall investment goals.

We hope we have been informative and provided you with a better understanding of managed futures and the potential benefits that they offer. To find out about recommended CTAs, please fill in the form and we will give you a call to discuss an appropriate strategy based on your financial profile. Be assured that the CTAs have been chosen based on their reputation, performance, prudent money management and trading styles. We look forward to working with you!

Please be advised that trading futures and options involves substantial risk of loss and is not suitable for all investors. There are no guarantees of profit no matter who is managing your money. An investor must read and understand the Commodity Trading Advisors current disclosure document before investing. Past performance is not necessarily indicative of future results.