Managed Futures Education Center

This review of High-Performance Managed Futures by former Yale University dean, publisher and trader Brenda Jubin had an unusual diversity of experience from which to review the publication.  Interestingly, she hit on most of the key points, omiting only the information about regulation and investor protections.

It is interesting to note how the academic community is reacting to the standard deviation argument I make in chapter six: Many serious academics have questioned the equal treatment of upside and downside deviation and support the concepts presented in this chapter.  I’m waiting for more discussion to take place regarding the correlation issues I outline in chapter nine, and obviously the portfolio building in chapter ten is interesting from several standpoints — but from my perspective I find the volatility skewing concept and strategy diversification to be the most compelling.  I enjoy conversations with other managed futures portfolio managers, many of whom have their own ideas regarding managed futures portfolio building information.

Below is the partial copy of the review.  To access the full review click here:

http://seekingalpha.com/article/227379-melin-s-high-performance-managed-futures-goes-beyond-standard-asset-allocation

Excerpts from book review below:

“Mark H. Melin’s High-Performance Managed Futures: The New Way to Diversify Your Portfolio (Wiley, 2010) goes far beyond the standard asset allocation book. It not only makes the case for managed futures but does so from the perspective of risk. It is thorough and well documented, yet at the same time eminently practical. Both high net worth individual investors and financial advisors could profit from it.”

“The most compelling reason to invest in managed futures is that they are not correlated to the equity market. For instance, managed futures had positive returns in nine of the past ten stock market declines. One caveat: these returns are based on the performance of indexes such as the Barclay CTA index and the CASAM CISDM index in which no one can invest. Instead, the investor’s return depends on the performance of individual commodity trading advisors (CTAs) who pursue a variety of strategies. There is no generic CTA, just as there is no generic hedge fund.”

“Since non-correlation is the key selling point of managed futures, Melin spends some time discussing proper correlation analysis. The traditional price correlation matrix, he contends, is faulty. As it relates to managed futures, “price correlation does not consider the CTA strategy or markets traded, which can be critical points of correlation in managed futures that are often not visible in traditional returns correlation.” As an example he cites the naked S&P option-selling strategy, which before the fall of 2008 had a 0.05 correlation to the S&P 500. It looked “almost perfectly uncorrelated to the S&P but in fact the strategy was correlated and still is correlated to a catastrophic stock market collapse.” (p. 161) Melin maintains that the best correlation methodology includes five key ingredients: returns/price, strategy, market, time frame, and volatility.”

http://seekingalpha.com/article/227379-melin-s-high-performance-managed-futures-goes-beyond-standard-asset-allocation

CONTENT DISCLOSURE

This web site and related communication substantially represent the opinions of the author and are not reflective of the opinions of any exchange, regulatory body, trading firm or brokerage firm. The opinions of the author may not be appropriate for all investors and there is no warrantee relative to the accuracy or completeness of same.

RISK DISCLOSURE

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. YOU COULD LOOSE ALL OF YOUR INVESTMENT OR MORE THAN YOU INITIALLY INVEST. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS.

THE DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR (“CTA”). THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION (“CFTC”) REQUIRE THAT PROSPECTIVE CUSTOMERS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT’S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. THIS DOCUMENT IS READILY ACCESSIBLE AT THIS SITE. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.

YOU ARE ENCOURAGED TO ACCESS THE DISCLOSURE DOCUMENT. YOU WILL NOT INCUR ANY ADDITIONAL CHARGES BY ACCESSING THE DISCLOSURE DOCUMENT. YOU MAY ALSO REQUEST DELIVERY OF A HARD COPY OF THE DISCLOSURE DOCUMENT, WHICH WILL ALSO BE PROVIDED TO YOU AT NO ADDITIONAL COST.

PFG BEST DOES NOT HAVE AN OWNERSHIP STAKE IN ANY OF THE CTAS WE RECOMMEND OR UPON WHICH WE PROVIDE RESEARCH. MUCH OF THE DATA CONTAINED IN THIS REPORT IS TAKEN FROM SOURCES WHICH COULD DEPEND ON THE CTA TO SELF REPORT THEIR INFORMATION AND OR PERFORMANCE. AS SUCH, WHILE THE INFORMATION IN THIS REPORT AND REGARDING ALL CTA COMMUNICATION IS BELIEVED TO BE RELIABLE AND ACCURATE, PFG BEST CAN MAKE NO GUARANTEE RELATIVE TO SAME. THE AUTHOR IS A REGISTERED ASSOCIATED PERSON WITH THE NFA.

Entire website Copyright © 2010 by Mark H. Melin. All rights reserved. Book published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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