Ranjan Bhaduri, AlphaMetrix Alternative Investment Advisors, Chicago

Managed futures, a.k.a. CTAs, are a diverse collection of active trading strategies which specialise in liquid,
transparent, exchange-traded futures, options, and foreign exchange.
 

Some institutional investors will consider investing in hedge funds, yet shy away from investing in managed
futures. However, the term ‘hedge fund’ in itself does not mean much, or rather means too much, as there
are programs along the entire actively managed investment continuum, from mutual funds to private equity
funds that call themselves hedge funds. CTAs may be thought of a liquid sub-set of the hedge funds universe,
whose trading domain is exchange-traded instruments of futures, options and deep foreign exchange markets.
 

The strategies, styles, and techniques invoked among different CTAs are very diverse. While there does not
appear to be a cogent rationale for the exclusion of CTAs versus hedge funds in their investment mandates,
institutional investors still remain wary of the managed futures space. It is further perplexing that these
biases exist given that managed futures utilise plain vanilla derivatives and exchange-traded instruments
as their building blocks, and these are well-understood in both the literature and industry (see, for instance,
Hull or Labusewski, et al).
 

Some CTAs have, from a marketing perspective, positioned themselves away from managed futures, and
labeled themselves as hedge funds, in order to attract more assets.1