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Alternative investments: Managed futures and hedge funds
(Source: Merrill Lynch)

Historically, whole significant non-correlation has existed between the performance of alternative investments (such as managed futures and hedge funds) and that of stock and bond investments, suggesting these investments can be a valuable complement to a traditional portfolio. Allocating a portion of the risk segment of a portfolio to alternative investments can add a valuable element of diversification to a traditionally structured portfolio and may enhance the prospects for superior overall performance.

Managed futures funds are professionally managed investments that take positions in currency, financial, energy, metals and agricultural markets by purchasing futures contracts, options of futures contracts and forward contracts. These funds can take either long or short positions in these markets.

Hedge fund investments, usually structured as private investment partnerships, encompass a wide variety of skill-based investment approaches. Hedge funds primarily invest in debt and equity markets, but they may also take significant positions in the markets available to managed futures funds. Common among all hedge fund investments is the use of leverage and the employment of short positions as a complete or partial hedge.

Professional management is important for these highly complex and specialized investments. offers managed futures and hedge fund investments structured to meet a variety of investor needs.'s family of funds includes multiple- and single-advisor investments that vary by return/risk objectives, minimum investment and purchase policy. For some investors, a combination of funds with varying return/risk objectives may be appropriate in order to meet investment objectives.

An investment in managed futures or funds is speculative and involves a high degree of risk. An investor should be in a position to make a two- to three-year commitment. Each prospective investor must carefully assess the risks of futures and forward trading before determining whether to invest.

Recommended further reading:
Books on Financial Instruments
    Online book: Understanding Financial Markets & Instruments
    Chapter 6: Derivatives - Futures
    Chapter 7: Derivatives - Options
    Chapter 8: Specialised Interest Rate Derivatives
    Chapter 9: Valuation and Accounting of Financial Instruments and Derivatives
    Chapter 10: Derivatives - Hedging Techniques