An Analysis of the Risk‐Return Characteristics of Serially Correlated Managed Futures

Abstract

We investigate the implications of low but persistent serial correlation in Managed Futures' returns for portfolio management. Using a measure based on the unweighted sum of autocorrelations, we find that more positively autocorrelated Managed Futures exhibit distinctly different risk‐return profiles and outperform, on a risk‐adjusted basis, Managed Futures that exhibit lower degrees of serial correlation. The observed premium is unlikely to be explained by a concentration in certain strategies, fund size and age, attrition or delisting bias, and does not seem to hamper Managed Futures' portfolio benefits as a tail‐risk hedge. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 36:992–1013, 2016

A stochastic control approach to managed futures portfolios

“…Regulated and monitored by both government agencies such as the U.S. Commodity Futures Trading Commission and the National Futures Association, this class of assets has grown to over US$350 billion in 2017. 1 One appeal of managed-futures strategies is their potential to produce uncorrelated and superior returns, as well as different risk-return profiles, compared to the equity market (Gregoriou et al, 2010;Elaut et al, 2016). While the types of securities traded and strategies are conceivably diverse among managed futures funds, details of the employed strategies are often unknown.…”