Investment Week: How managed futures can diversify client portfolios

15 November 2017

Increasing correlation between bonds and equities, rising interest rates, increased geopolitical risk and potentially overheating markets appear to have eroded many of the diversification benefits of the 60:40 balanced portfolio. The traditional asset management portfolio, long considered a low risk, default option, may no longer be a match for today’s markets.

Writing for Investment Week, fund manager Darran Goodwin writes that a recent research paper published by AIMA and Societe Generale supports this theory. ‘Riding the Wave’ describes what managed futures are, how they work and concludes that ‘adding managed futures to a diversified portfolio has the result of increasing both the total investment portfolio’s return and reducing its risk, consequently improving its risk-adjusted return.’  Read the full article here.

Similarly, our own internal research shows that blending the returns of Garraway Financial Trends with a series of balanced portfolios, using the various IA (Investment Association) mixed asset sectors as proxies, in all instances resulted in an increased compound annual growth rate, a reduced maximum drawdown, a lower annualised downside deviation and improved Sharpe and Sortino ratios.  

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