What Questions Should You Be Asking BEFORE You Invest?
If you are anyone other than an individual investor (i.e. family office, pension fund manager, or RIA), then it is not important for you to continue reading, as you likely already know this managed futures "secret."
Once an individual investor has made up their mind to make an investment in managed futures, they usually rely on an investment advisor to provide due diligence and make recommendations on which CTAs to invest with. If an investment advisor is not being consulted, then most times, an investor will use a portfolio builder to test out different combinations of CTAs to see which combination yields the best risk adjusted return. While there is nothing wrong with this approach (assuming a rigorous analysis has been completed), many times individuals are not aware that they can add an additional step in the process: speaking with the portfolio manager/head trader at each CTA that they are considering an investment with.
One major reason that investors are not aware that most CTAs are available to answer questions via phone is because it is not openly advertised. Well here's the biggest advertisement you'll see regarding this: ALMOST ALL CTA PORTFOLIO MANAGERS ARE WILLING TO SCHEDULE A CALL WITH PROSPECTIVE INVESTORS TO ANSWER ANY QUESTIONS YOU MIGHT HAVE. If you are interested in speaking with them, ask your investment advisor or broker to schedule a call for you, as they most likely already have a relationship with the CTA and are most aware of their schedule.
While some investors might be hesitant to speak with portfolio managers, since they may not be sure what types of questions to ask, here are a few simple questions that can provide a lot of insight:
What is your background (education and professional), and how did you become the head trader at XYZ CTA?
How do you generate ideas for potential trades?
Why did you decide to focus on the markets outlined?
What is your edge?
Without getting too technical, the above questions can be very insightful and give an investor a decent idea of what it would be like to invest with the CTA. If nothing else, it gives the investor either more confidence to go ahead with the investment or raises a personal red flag as to why they might not like what the CTA has to offer.
While it is never required for investors to speak with CTAs prior to making an allocation, we like to notify our investors that the option is always available. Speaking with the person(s), who will eventually be managing your money can be a very important step prior to making an allocation, then you have laid the ground work to periodically call them after becoming their client. This helps when a CTA is in a drawdown, and you would like to know what challenges they are facing - what better way than to schedule a call and ask?
Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial risk of loss and may not be suitable for everyone. By no means is this newsletter/blog post offering any investment advice or suggesting to make any trade recommendations. Please consult an eFloorTrade, LLC ("eFloorTrade") advisor prior to opening any managed futures accounts.
All opinions expressed constitute those of eFloorTrade as of August 2019 and are provided for informational purposes only. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin. The information is based on the economic and market conditions as of this date. The information is not intended as a discussion of the merits of a particular offering and should not assume that any discussion or information provided herein serves as the receipt of, or as a substitute for personalized investment advice from eFloorTrade or any other investment professional.
The material is provided for informational purposes only and does not constitute a solicitation. The material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any forecasts made with come to pass.