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The Complete Guide to Futures Trading: What You Need to Know about the Risks and Rewards by Lind-Waldock

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CHAPTER 4

Letting the Pros Trade Your Account

For those who would like to take advantage of the benefits that futures provide but don't want to be involved in trading directly themselves, an alternative is a managed account traded by professional money managers.

Managed futures accounts have been used by high-net-worth individuals for more than 25 years as a way to diversify their portfolios and enhance overall rates of return. The managed futures concept, which has been around since 1970, has grown most dramatically in recent years as the number of financial contracts available to traders increased and the interest in more traditional investments fluctuated. The total assets under management have risen from almost $26 billion at the end of 1994 to almost the $120 billion level by the end of 2004, the Barclay Trading Group1 estimates—an increase of more than 450 percent in 10 years!

More than 400 managed futures programs are offered by commodity trading advisors (CTAs). The programs are created by individuals or groups of individuals who have designed a method of trading that historically has had higher profits than losses.

Anyone who offers a managed futures program in the United States must be registered as a CTA or a commodity pool operator (CPO) with the National Futures Association (NFA), the direct operational watchdog of all futures firms and futures professionals that is itself governed directly by the Commodity Futures Trading Commission (CFTC), a federal government agency. ...

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