Managed Futures

Many investors understand very little about managed futures funds. Managed futures funds have long been touted by major Wall Street firms that manage and market this type of investment strategy. Investors are sold these funds with promises they receive investment opportunities in asset classes not readily available to most investors. Investors rely on the fund managers as the experts at trading futures contracts. However, these misunderstood and complex investments are laden with excessive fees, costs and commissions which may dramatically impact potential investor’s return on investment.

Managed futures money managers, known as the trading manager are generally compensated by a flat management fee based on assets under management, in addition to an “incentive-based” fee based on profits. This “performance-based” fee is usually paid net of all fees designed to reflect net trading profits above the previously established account threshold balance. In addition to management and performance fees, a managed futures account has deducted from the balance expenses for transactions costs and commissions. However, many investors do not appreciate that these fees and costs can evaporate any real or potential profit an investor can earn.

A report, CFTC Opens Probe Into Fees Charged by Managed Futures Funds, by Bloomberg highlights the problem with managed futures which has now evolved into an investigation by the Commodities Futures Trading Commission (CFTC) and legislators into the high fees charged to investors in the $337 billion managed futures market. The CFTC’s investigation begins as a U.S. Senate committee urged the CFTC and the SEC to study ways to provide investors with clear disclosures about the high fees charged to retirement accounts invested in managed futures funds. The managed futures investment strategies employed include trading futures contracts in equity indexes, debt-related instruments, commodities and currencies. As a result of the development of global exchanges, investments in futures contracts are becoming highly liquid investment vehicles which connect the world economies.

The primary rationale for investing a portion of an investor’s portfolio in managed futures contracts is to generate portfolio returns with greater returns on a risk-adjusted basis. The supposed low to negative correlation of managed futures funds provides superior results for an investment portfolio during “down markets” which smooth portfolio returns over time. Professional money managers caution investors cannot “market-time” when to invest in managed futures funds making the recommended investment in managed futures funds a permanent part of a buy-hold asset allocation strategy.

There has been recent debate in the financial services industry about the excessive fees charged by managed futures funds, in the Financial Advisor magazine article, Fees Obliterate Managed Futures Fund Profits, for long term investors in managed futures funds, excessive management fees have absorbed the gross returns achieved by managed futures funds making this highly profitable for many Wall Street firms with little benefit to investors.

We are currently investigating the following managed futures funds amongst others. For investors who were solicited by their financial advisor to invest in the following managed futures funds, contact us for a free consultation:

• Morgan Stanley/Ceres Managed Futures Funds
• Merrill Lynch Managed Futures Funds
• Other Managed Futures Funds
  • Grant Park Futures Fund LP
  • Altegris Winton Futures Fund LP
  • Campbell Strategic Allocation Fund L.P.
  • RJO Global Trust
  • BlackRock Global Horizons I L.P.
  • Managed Futures Premier BHM Fund

Silver Law Group is currently investigating whether major Wall Street firms are in compliance with securities industry laws including Financial Industry Regulatory Authority (FINRA) sales practice rules and regulations concerning claims related to conflicts of interest, misrepresentations and omissions of material facts, undisclosed fees and commissions, illiquidity, failure to conduct adequate due diligence, failure to supervise and train registered representatives on how to properly sell these types of investments, failure to provide investors with a full, fair and balanced presentation, and whether the recommendations made to investors resulted in unsuitable investment advice based on client investment ability to understand and assume the risks associated with managed futures funds.