Managed Futures

Managed futures is an alternative investment strategy where professional managers trade futures contracts across a diversified set of global markets, including equities, fixed income, commodities, and currencies. Unlike traditional investing that only buys and holds assets, managed futures can take both long positions to profit from rising prices and short positions to profit from falling prices. This flexibility lets the strategy generate returns in both bull and bear markets.

As of 2025, global managed futures industry assets under management surpass $340 billion. Fidelity Investments launched the Fidelity Managed Futures ETF on the Nasdaq in June 2025, reflecting the strategy's continued expansion from institutional-only access into retail investment vehicles.

Who Runs Managed Futures Programs

Two types of regulated professionals operate managed futures programs, and understanding their roles clarifies how the strategy is structured.

Commodity Trading Advisors are individuals or firms that manage client assets directly. They are registered with the National Futures Association and the Commodity Futures Trading Commission. There are approximately 1,800 Commodity Trading Advisors registered in the United States. Each uses its own proprietary approach, ranging from systematic quantitative models to discretionary judgment-driven trading. Think of a Commodity Trading Advisor as a fund manager whose entire toolkit consists of futures contracts and forward agreements.

Commodity Pool Operators are organizations that pool capital from multiple investors and hire one or more Commodity Trading Advisors to manage it. They function as manager-of-managers, combining the performance of several external Commodity Trading Advisors into a single fund structure. There are approximately 1,100 registered Commodity Pool Operators in the United States.

Systematic Trend Following Is the Dominant Strategy

Most managed futures programs use systematic trend following. The approach is straightforward: identify directional price trends in global markets and maintain positions as long as the trend persists.

If crude oil has been rising steadily for three months, the system holds a long crude oil futures position. If the Japanese yen has been declining, the system holds a short yen position. The models do not predict direction. They detect existing momentum and follow it.

The strategy earns the label "crisis alpha" because trend-following programs have historically performed well during equity market crises. When markets fall sharply and consistently, the same momentum-detection models that capture rising trends also capture falling ones, often generating positive returns precisely when traditional portfolios are suffering worst.

The Asset Classes Traded

Managed futures programs trade across four main categories of futures markets. The breadth of these markets is one of the strategy's key diversification advantages.

• Equity index futures: Contracts on major stock indices such as the S&P 500, Eurostoxx 50, and Nikkei 225.
• Fixed income futures: Contracts on government bonds, including U.S. Treasury notes, German Bunds, and UK Gilts.
• Commodity futures: Contracts on agricultural products like soybeans and corn, energy products like crude oil and natural gas, and metals like gold and copper.
• Currency futures and forwards: Positions in currency pairs across major and emerging market currencies, including the Euro, British pound, Japanese yen, and Australian dollar.

The Low Correlation Advantage

Managed futures have historically exhibited near-zero correlation to equities and bonds over full market cycles. Adding a managed futures allocation to a traditional 60/40 stock-bond portfolio has consistently improved risk-adjusted returns in backtested analyses. The reason is structural: managed futures profits from market movement in any direction, while stocks and bonds generate most of their returns from broadly rising prices.

That low correlation does not guarantee managed futures programs perform well in all market conditions. In flat, range-bound markets with no sustained trends, systematic trend followers generate few signals and often post small losses or flat returns. The strategy earns its keep during periods of sustained directional movement, whether up or down.

How to Access Managed Futures

Institutional investors have accessed managed futures through direct managed account relationships with Commodity Trading Advisors or through commodity pools since the 1980s. Retail access has expanded significantly. As of 2025, several exchange-traded funds offer managed futures strategies, including the iMGP DBi Managed Futures Strategy ETF with over $1 billion in assets, the KraneShares Mount Lucas Managed Futures Index Strategy ETF, and the WisdomTree Managed Futures Strategy Fund, which now includes bitcoin futures exposure. These products carry substantially lower minimum investments and management fees than traditional hedge fund structures.

Sources

• https://institutional.fidelity.com/advisors/insights/topics/investing-ideas/managed-futures-as-a-powerful-portfolio-diversifier
• https://corporatefinanceinstitute.com/resources/derivatives/managed-futures/
• https://www.cmegroup.com/education/courses/managed-futures/what-are-managed-futures
• https://thehedgefundjournal.com/managed-futures-d1/
• https://www.etftrends.com/managed-futures-becoming-mainstream-alternative/