What is a 'Managed Futures Account'

A Managed Futures Account is an alternative investment instrument, similar in structure to a mutual fund, but with a focus on derivatives, including futures contracts.

BREAKING DOWN 'Managed Futures Account'

Managed Futures Accounts resemble mutual funds in many ways. Also sometimes known as Managed Futures Funds, these funds are managed by Commodity Trading Advisors or Commodity Pool Operators who are authorized to trade in futures and other derivative securities. Fund managers can take both long and short positions on futures and options in the global markets for commodities, currency, equity, interest rates and more.

Proponents of managed futures accounts champion the attractive elements of these funds, indicating that they offer reduced portfolio volatility, because futures markets are leveraged and offer capital efficiency. Proponents also advocate managed futures for their potential to earn profit in any economic environment, because futures operate differently than equities and bonds, giving them the ability to remain competitive within the movements of both bear markets and bull markets. Additionally, futures investments are available in a wide array of global market sectors, including commodities, currency, metals, energy, and other financial instruments.

Detractors cite as negative aspects the variables in derivatives markets, the lack of long-term performance data of managed futures, and questions about the longevity and regulation of the individual funds.

Managed futures have seen increased institutional use in recent years. In the first quarter of 2018, total funds managed by the CTA industry were reported at $367.3 billion, according to figures published by Barclay Hedge Fund.

Managed Futures Accounts and Commodity Trading Advisors

Managers of managed futures funds are designated either as Commodity Trading Advisors (CTAs) or Commodity Pool Operators (CPOs).

The managed futures industry is so reliant on its commodities trading advisors that it is sometimes also referred as the CTA industry. CTAs are individuals or organizations that manage assets and provide advice for trading in derivatives. This term is also sometimes used to describe advisors to hedge funds, mutual funds and other similar investment instruments.

CPOs differ from CTAs slightly in that they advise in the operation of commodity pools, investments in which several investors pool funds to invest in futures as a single entity. Many hedge funds, for instance, are also commodity pools.  

CTAs and CPOs are regulated by the Commodity Futures Trading Commission (CTFC) and the National Futures Association (NFA). CTAs are required to register with the CTFC before doing business with the public. Additionally, CTAs are required to pass an FBI background check and file annual disclosure documents and audited financial statements, which are reviewed by the NFA.

  1. Managed Futures

    Managed futures refers to a portfolio of futures trades by professionals ...
  2. Commodity Pool

    A commodity pool is a private investment structure that combines ...
  3. Commodity Trading Advisor - CTA

    A commodity trading advisor provides advice regarding the buying ...
  4. Pooled Funds

    Pooled funds aggregate capital from a number of investors, as ...
  5. Excluded Commodity

    An excluded commodity cannot be manipulated because it is beyond ...
  6. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
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