How To Find The Best Managed Futures Fund For You

Managed futures are an excellent way to invest in the commodity futures markets and many academic studies confirm that managed futures help increase long-term investor returns. The good part is that you will have a professional money manager to manage your futures account and it takes up little of your time. Once you have decided to invest in managed futures, you will have hundreds of funds to choose from. Where do you start and which one is best for you?

Managed Futures Search

Luckily, there are a few websites that provide listings of Commodity Trading Advisors (CTAs) and their managed futures funds. I use IASG.com, Autumngold.com and ManagedFutures.com to review the performance of these funds. The sites are mostly free and they provide most of the information you need.

To save you time, they have search features where you can rank funds by performance, size, risk and other factors.

How to Pick a Managed Futures Fund

There are several important things you will want to examine when doing your search. Most investors will immediately rank the funds by their previous returns for the last 12 months, 3 years or 5 years. Performance is certainly an important feature, but you will have to look at some other areas to find the best fund for you.

Minimum Account Size – Some managed futures accounts start as low as $25,000 and some require an investment over $1 million.

Accepting New Money? – A fund may have a stellar track record, but they may no longer be accepting new investors. Make sure you check before you waste your time.

Drawdowns – This is the worst drop from peak equity to the lowest equity in the history of the fund. A CTA could average 30 percent returns every year, but may be prone to 50 percent drawdowns. Are you prepared for that volatility?

Fees – Most managed futures have an incentive fee of 20 – 25%. This means they share in your profits. They usually also have a management fee of about 2 percent and charge a brokerage commission on each trade.

Markets – Which markets the fund trades may also be of concern to you. Some have a narrow focus and other will trade more than 50 futures markets.

Trading Style – The profile normally details whether the fund uses a technical, fundamental, systematic and/or discretionary approach to trading.

After reviewing and comparing all these details, you will want to find the fund that suits your investment needs the best. This should be a good balance of historic returns, trading style and a level of risk that will allow you to sleep well at night.