|Adding managed futures strategies to portfolios reduces tail risk and volatility, says a paper: “Revisiting Kat’s Managed Futures and Hedge Funds: A Match Made in Heaven,” Thomas Rollinger, Sunrise’s Director of New Strategies Development. The research extends the time period to include the seven years originally considered by Dr. Harry M. Kat, June 1994 through May 2001, plus 3.5 years prior to Kat’s study, and all subsequent months through December 2011.
“We find that Dr. Kat’s observations continue to hold true,” concludes Rollinger. “During the subsequent 10.5 years, a highly volatile period that included separate market drawdowns of 36% and 56%, managed futures have continued to provide more effective and more valuable diversification for portfolios of stocks and bonds than have hedge funds.” Managed futures strategies are professionally managed investment portfolios that may contain commodities, equity index, fixed income, and currency futures, also options, forwards, and swap contracts. They are similar to hedge funds in that they can hold long or short positions in an investment and can be used to execute complex strategies designed for total return, hedging, risk management, or other objectives. (Press Release)