High-Performance Managed Futures: The New Way to Diversify Your Portfolio

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Overview

In High-Performance Managed Futures: The New Way to Diversify Your Portfolio, Mark Melin, a veteran of the managed futures industry, updates a Nobel Prize-winning investment method, guiding readers through investing in managed futures programs, where experienced money managers invest client assets in markets as diverse as metals, grains, soft commodities, energy, equity indexes, interest rates, foreign currency, and U.S. government bonds.

Many of today's investors are betrayed ...

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Overview

In High-Performance Managed Futures: The New Way to Diversify Your Portfolio, Mark Melin, a veteran of the managed futures industry, updates a Nobel Prize-winning investment method, guiding readers through investing in managed futures programs, where experienced money managers invest client assets in markets as diverse as metals, grains, soft commodities, energy, equity indexes, interest rates, foreign currency, and U.S. government bonds.

Many of today's investors are betrayed by either short-term thinking or another of Wall Screet's mantras-buy and hold. High-Performance Managed Futures exposes market myths, while also derailing how managed futures can help investors achieve meaningful asset diversification.

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Product Details

  • ISBN-13: 9780470637937
  • Publisher: Wiley
  • Publication date: 9/7/2010
  • Series: Wiley Finance Series, #598
  • Edition number: 1
  • Pages: 320
  • Sales rank: 1,243,770
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.30 (d)

Meet the Author

Mark H. Melin has written/edited three books,including The Chicago Board of Trade Handbook of Futures and Options, as well as coproduced the official Managed Futures CD-ROM for the Chicago Board of Trade.?Melin has worked extensively in the futures and options industry as a consultant for organizations such as the Chicago Board of Trade, OneChicago: The Single Stock Futures Exchange, as well as several Futures Commission Merchants (FCMs) and Broker Dealers (BDs). He is currently a division director with a leading FCM in Chicago.

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Table of Contents

Preface

Acknowledgments

Disclaimer

Chapter 1 Understand It: The Truth about Risk and Misunderstood Investments 1

What Is This "Managed Futures" I've Never Heard About? 2

Stock Market "Safety" and Other Myths 3

Invest with Stock Market Neutral Programs 5

The Stock Market Is Not "Safe" or "Conservative" and Does Not Offer True Diversification 6

It Works in Practice but Does It Work in Theory? 14

Wall Street's Motivation for Keeping Managed Futures a Secret 16

Chapter 2 Define It: Establish Performance and Risk Targets 25

The Simple Managed Futures Definition 27

Target Risk/Reward Profiles 28

Chapter 3 Work With It: Build Portfolios Using Targets 41

Portfolio Diversification versus Individual Manager Selection 43

Individual CTA Analysis and Portfolio Considerations 52

Chapter 4 Realize It: The Old Way versus High Performance 69

The Fastest-Growing Asset Class? 69

This Unique and Very Special Asset Class 70

Managed Futures Defined 72

Decoding the D Doc 85

Chapter 5 Don't Be Victim: Leverage Managed Futures Regulation and Account Structure to Avoid Hedge Fund Fraud 89

Managed Futures Regulation, Account Structure, and Protection 90

Transparency: The Ability to See and Understand an Investment 91

Auditing Performance and Money Flow 95

Tight Regulatory Control: Meet the NFA and CFTC 98

Chapter 6 Recognize It: Volatility + Volatility and Lintner's Message 101

Volatility Used to Reduce Volatility 103

All Volatility Is Risky To Different Degrees 103

Standard Deviation as Measure of Volatility 117

Chapter 7 Use It: Reward-Adjusted Deviation (RAD) Considers Past Probability and Rewards Success 119

Study 1 Exploring RAD with Math 120

The Test of Success 122

Study 2 Average Drawdown: RAD versus STD When Actual Risk Improves 124

Study 3 Where CTAs Fall Based on RAD 127

Risk "Indicators" Don't Indicate Risk 131

Chapter 8 Protect It: Principal-Protected, Conservative, and Risky Investments 133

Don't Be Fooled 134

Four Steps to Creating Principal-Protected Products 137

Strategies to Maximize Return 139

Chapter 9 Use All of It: Overlooked Points of Correlation 147

Is Managed Futures the World's Most Noncorrelated Asset? 149

Balance Risk and Return: Managed Futures Cushion during Stock Turbulence 150

Correlation Study: Major Indexes 152

Managed Futures Noncorrelation Is Not an Accident 154

Traditional Returns-Based Correlation Logic Is Faulty 160

Noncorrelation with Stocks Could Be the Investor's Best Friend 167

Chapter 10 Build It: CTA Evaluation and Portfolio Construction 169

Translating Investor Goals into Portfolio Design Strategy 171

What Is the Best Method to Identify Successful CTAs? 173

Portfolio Building with Volatility Skewing 176

High-Performance Managed Futures Portfolio-Building Exercise 178

Why Investors Must Look Past Simple Average Return Headlines 191

The Hidden Risk in Uneven Returns Distribution 193

Don't Judge by Looks Alone 194

Chapter 11 Understand It: The Naked Truth Behind Managed Futures Risk 199

The Simple Way to Look at Risk Management: Choke Points 201

Leverage Can Magnify Wins as Well as Losses; Just Ask a Banker 203

Exploring Individual Manager Risk 209

Fraud Risk 212

Chapter 12 Don't Sit Back: Active Management of Risky Investments 217

Are the Biggest Risks Those That Are Unknown? 219

A Graphical Look at the Managed Futures Account 221

Individual Manager Risk 228

The Future of Managed Futures can be Found in its History 230

Conclusion 236

Appendix A HPFM Strategy Benchmark Performance Study 239

Appendix B Twelve Questions Investors Should Ask of Themselves 242

Appendix C Selecting a Commodity Trading Advisor 244

Appendix D Identifying True Risk and Utilizing the Best Managed Futures Performance Measure 253

Appendix E Regulated versus Unregulated Entities 268

Appendix F Markowitz and Lintner: A "Modern" Investment Method Half a Century Old 271

Notes 281

About the Author 297

Index 299

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