Managed Futures by itself can be a high risk/high return investment (actually when compared to stock portfolios, its no riskier), but when added to your overall liquid portfolio, it can actually reduce the entire risk of your portfolio dramatically. We highly recommend you read, the article below for a quick education on managed futures assets; what they are and how they can help you.
Managed Futures have proven to be a great investment ( especially creating your own "fund" and diversifying with many CTA's ), but choosing the right managers and CTA's can be the most daunting part of the process, and requires a great deal of due diligence and review.
Disclaimer Not all investors are suitable for commodity trading in futures and options, even if managed by at CTA. In some cases, managed commodity accounts are subject to substantial charges for management and advisory fees. It may be necessary for those accounts that are subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the Commodity Trading Advisor (CTA). Please read through all the risks involved, all applicable fees charged as well as the performance record reading thoroughly the Disclosure Documents of each Commodity Trading Advisor you are interested in investing with.
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BREAK-EVEN ANALYSIS
*** IMPORTANT***
PLEASE READ CAREFULLY
Please note that your introducing broker may charge a front-end fee which must be recovered, along with the commissions and CTA fees, in order for your account to be profitable. The following presents a two year break-even analysis assuming the highest amount of fees that can be charged your account.
| |
Year 1 |
Year 2 |
| Initial Investment |
$50,000 |
$50,000 |
| Up-Front Fee |
$ 3,000(1) |
$ 0 |
| Management Fee |
$ 940 (2) |
$ 940 (2) |
| Commissions |
$ 4,700(3) |
$ 4,700(3) |
| Round-Turns |
$ 1,200(4) |
$ 1,200(4) |
| Accounting Fee |
$ 240(5) |
$ 240(5) |
| Incentive Fee |
$ 1,000(2) |
$ 0(6) |
| Amount of Income to Break-even |
$11,080 |
$ 7,080 |
| Break-even % |
22% |
14% |
Please be apprised that these calculations include an estimation of the round-turn commission on an annual basis. This amount of the above fees could differ but will not have a material effect on the break-even percentage.
(1) Based upon an up-front fees of 6% charged by the IB.
(2) Based on management fee of 2% and incentive fee of 25%.
(3) Commissions charged by IB based on .83% of the monthly net equity received by IB.
(4) Commissions charged by Vision based on $20 per round-turn multiplied by the average number of round-turns placed by the CTA, average of 12 round-turns per month.
(5) Accounting fee of $20 charged by Vision monthly.
(6) No incentive fees are shown as they will be charged only after taking into account all expenses.
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Before you continue, YOU MUST read these 3 articles about managed futures:
- Q & A Report by the Chicago Mercantile Exchange:
- Q & A study by the Chicago Board of Trade:
- Modern Portfolio Theory; Dynamic Diversification For Today's Investor :
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