CAIA Level II: Advanced Core Topics in Alternative Investments, 2nd Edition

31.3 RESEARCH ON PERFORMANCE AND BENEFITS OF MANAGED FUTURES

A more direct way to examine the attractiveness of a managed futures investment is to analyze the performance of managed futures traders. In 1983, John Lintner presented one of the first academic papers on this topic. His analysis was designed to examine the risk-return characteristics of managed futures accounts or funds. In this study, Lintner concluded that “the combined portfolios of stocks (or stocks and bonds) after including judicious investments…in managed futures accounts (or funds) show substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds) alone.”

Lintner's work provided an initial academic basis for investing in managed futures. Other early studies that followed his research both challenged and supported his results. A series of studies by Elton, Gruber, and Rentzler (1987, 1989, and 1990), known as the EGR studies, examined public commodity pools and found little evidence of the benefits of managed futures. Other analyses of managed futures supported the inclusion of managed futures in investment portfolios.5 Some of these later analyses attempted to address data issues in the EGR studies. The EGR studies looked at public commodity pools, known to have been a very expensive way to invest in managed futures. Later analyses directly examined the returns of managed futures traders and found evidence that, on average, managed futures provide attractive ...