Practical Applications of CTAs: Superior Performance or Diversification Only?

Practical Applications Summary

CTAs: Superior Performance or Diversification Only?, published in the Spring 2018 issue of The Journal of Wealth Management, demonstrates the advantages of including managed futures in investment portfolios. Although risk-adjusted returns are shown to be somewhat weak relative to traditional asset classes, very low correlation makes CTAs a valuable addition from a Modern Portfolio Theory standpoint. The authors, Martin Florea (now at Cevian Capital), Stefan Florea (now at Morgan Stanley), Iliya Kutsarov, Thomas Maier, and Marcus Storr (FERI Trust) also demonstrate that these diversification benefits do not necessarily require (actively managed, expensive) CTAs but may be delivered by (cheaper) alternative betas.