Abstract: Risk Management Through Managed Futures

Donald R. Broome

Today, managed futures are increasingly accepted as an important and distinct alternative investment that can potentially improve overall portfolio performance.

While some investors utilize managed futures as a way to achieve substantial returns, more and more investors look to managed futures as a way to reduce the risk, or volatility, in their portfolio and increase its overall long term rate of return.

Managed futures attempts to accomplish this seemingly contradictory result in three important ways, with:

I. Features unique to futures markets, such as:

-- trading diversified markets unrelated to stocks and bonds, such as precious metals, energy, currencies and agricultural products

-- providing flexibility to profit in both declining and rising markets

-- using leverage to maximize the effect of small price shifts.

II. Professional management to control risk and exploit trading opportunities.

III. Performance results with low correlation to traditional investments

AAPG Search and Discovery Article #90960©1995 AAPG Southwest Section Meeting, Dallas, Texas