Commodity Trading Advisors and Managed Futures
Managed futures strategies provide investors with a dynamic exposure to commodities. Among other ways of investing in them, commodity trading advisors (CTAs) have become synonymous with this asset class, as they provide professional money management services using derivatives markets either in a pooled or individual setting. Most managed futures strategies display trend-following and momentum-type systematic trading features, which result in adopting a long-short portfolio approach. This chapter explains the characteristics and the growth of this commodity investing industry and provides an extensive literature review. Much of the literature finds that managed futures investing through CTAs provides excellent diversification benefits and performs well, especially in crisis times. Conversely, the non-uniformity of the databases and indices used in these studies lead to several biases. Some recent studies that directly address these shortcomings question the performance persistence of CTAs after fees.