Managed futures ‘not a tail risk strategy'

There are common misperceptions of managed futures and the drivers of CTA returns, bolstered by poor performance of CTAs in 2011-13


Behavioural finance literature highlights that investors often use heuristics or rules of thumb in decision-making. At times, such rules can be an oversimplification, leading to poor decision-making.1 In assessing managed futures, investors often appear to rely on similar rules of thumb. Three of the most common perceptions of managed futures are:

1. managed futures is a tail risk strategy which only works in times of financial stress;

2. managed futures is a long volatility strategy, which only

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