Managed Futures Describes an Instrument, Not the Strategy. It’s Trend Following

Wall Street types love to call trend following trading ‘managed futures’. That makes no sense. Futures are an instrument, NOT a strategy. The largest so-called managed futures firms are trend followers. If you want acceptance, if you want confusion alleviated, then call the strategy something that makes sense. Jerry Parker, an original Turtle who runs a trend following managed futures firm, has said it well:

“I think another mistake we made was defining ourselves as managed futures, where we immediately limit our universe. Is our expertise in that, or is our expertise in systematic trend following, or model development. So maybe we trend follow with Chinese porcelain. Maybe we trend follow with gold and silver, or stock futures, or whatever the client needs. It’s called managed futures because that was the profit center at the FCMs. We’re trading these great systems, and testing, and making sure what we do has worked in the past. And being disciplined, and unemotional, and applying our methods to the futures markets. But limiting our trading to this one group of markets. We need to look at the investment world globally and communicate our expertise of systematic trading. You have Big Blue beating the world chess champion, and everybody saying yeah, that makes sense, I can understand that. We’ve not been able to maximize our opportunities with systematic trading. People look at systematic and computerized trading with too much skepticism. But a day will come when people will see that systematic trend following is one of the best ways to limit risk, and create a portfolio that has some reasonable expectation of making money. We’ve got to be there and ready to take advantage of the opportunity. I think we’ve mis-communicated to our clients what our expertise really is. Systematic trading is going to be better for everyone in the long run. Our methods will work on lots of different markets. The ones that are hot today, the ones that are not hot today. We don’t want to pigeon-hole ourselves as managed futures or commodities.”

Excerpts: Managed Account Reports

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6 thoughts on “Managed Futures Describes an Instrument, Not the Strategy. It’s Trend Following

  1. Not sure when he made the comment off top of my head, but it was several years ago. That said, the date in my mind is not relevant. His words are true, yesterday or today — the industry is wrong to use this phrase managed futures. It’s an awful term.

  2. “Managed Futures” is bad, but I think “Commodity Trading Advisor” is even worse. “CTAs” don’t trade just commodities.

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