From the December/January 2013 issue of Futures Magazine • Subscribe!

Dynamic duo: Managed futures and hedge funds


In updating Kat’s study, we have validated its conclusions further. Managed futures continue to offer superior diversification compared to other strategies.Throughout our analysis, and similar to Kat, we found that adding managed futures to portfolios of stocks and bonds reduced standard deviation to a greater degree and more quickly than did hedge funds alone, and without the undesirable side effects on skewness and kurtosis.

The most impressive results were observed when combining both hedge funds and managed futures with portfolios of stocks and bonds. The most desirable levels of mean return, standard deviation, skewness and kurtosis were produced by portfolios with allocations of 70%-90% to alternatives and with a preponderance of the alternatives portfolio allocated to managed futures. 

“Mix and match” (below) shows performance statistics for portfolios that combine all four of the asset classes ranging from a 100% traditional portfolio to a 100% alternatives portfolio.

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