Ten Compelling Reasons to Consider 1. Diversity beyond traditional asset classes of stocks/ bonds/cash 2. Reduces overall portfolio volatility 3. Potential to increase returns along with reductions in volatility 4. Returns can be generated in any kind of economic environment 5. Performance during major stock market declines has been remarkable 6. Many successful pension plan sponsors have long utilized managed futures to generate alpha. 7. Wide variety of global futures products that are the most transparent and liquid instruments in existence. 8. CTA community is regulated and trade mostly on regulated futures exchanges throughout the world 9. Exchanges have sophisticated risk management in the form of clearing houses. 10. Overall the growth of the industry has been exceptional giving further credence to managed futures as an excellent addition to any asset allocation strategy. Source: CME Group PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 1
vs. Mutual Funds Diversification Professional Management Highly Regulated: -- NASD & SEC Daily Liquidity Potential Profit in Bull Markets Potential Profit in Bear Markets Mutual Funds Diversification Professional Management Highly Regulated: -- NASD & SEC Daily Liquidity Potential Profit in Bull Markets Potential Profit in Bear Markets Source: CME Group PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 2
Portfolio Diversification With a very low correlation with stocks, one of the most attractive features of managed futures is its ability to add diversification to an overall investment portfolio According to a recent CME study, portfolios with as much as 20% of assets in managed futures yielded up to 50% more than a portfolio of stocks and bonds alone. 20% THE IMPACT OF PORTFOLIO DIVERSIFICATION 15% 10% 5% 100% Stocks & Bonds Portfolio 80% Stocks and Bonds 20% Portfolio Source: Chart derived from statistics presented in the Chicago Mercantile Exchange s Q&A Report on 3
Increased Return Return Efficient Frontier With Allocation Optimum Portfolio Mix (01/1987-02/2008)* 12% 11% 10% 9% 20% 40% Stocks 40% Bonds 100% 8% 7% 50% Bonds 50% Stocks 6% 7% 8% 9% 10% 11% 12% Volatility Reduced Risk 1) Future: CASAM CISDM CTA Equal Weighted 2) Stocks: MSCI World 3) Bonds: JP Morgan Govt. Bond Global Source: Bloomberg & CME Group 4
Potential to Lower Overall Risk of a Portfolio Correlation of Asset Classes Bonds U.S. Stocks 1.00.30.23 Bonds.30 1.00.29 U.S. Stocks.23.29 1.00 Source: CME Group 5
Worst Drawdowns of Various Markets Dow Jones S&P 500 Total Return MSCI World FTSE 1000 DAX Nikkei 225 NASDAQ Comp 10% 20% 30% 40% 50% 60% 70% 80% : CASAM CISDM CTA Equal Weighted, Timescale 11/1990 02/2008 Source: Bloomberg & CME Group 6
Tax Benefits of Short term profits in futures are treated as 60% long-term (therefore being subject to a maximum tax of 15%). And 40% short term (normal taxable income). On the other hand, short-term trading profits in stocks (stocks held less than one year) are treated as 100% short term. This favorable tax treatment for futures can translate for those in the upper tax brackets, saving as much as 30% on taxes on short term gains in futures versus stocks! Alternative Investments such as managed futures are not suitable for all investors. We recommend managed futures should only be used with speculative capital, and that investments not exceed 20% of assets or 10% of clients overall net worth. 7