What Can Managed Futures Do That Bonds Cannot?

Following a (long but) cool whitepaper our friends at Mt. Lucas authored about managed futures and how to use them in a portfolio (AlphaCentric White Paper: Dirty Portfolios, Managed Futures as a Portfolio Element (alphacentricfunds.com) we wanted to take a little bit deeper look at just a few items regarding managed futures and their employ in a portfolio.

Here is a chart from our friends at Goldman:

Some points:

• Check out the correlation of managed futures and the stock market. They are uncorrelated and, in stock/bond drawdowns, are often negatively correlated

• It is rare for managed futures to be down when 60/40 is down

• Managed futures tends to do well in inflationary periods

Thus, perhaps a great way to diversity and especially to "balance" the risks while investing might be to include managed futures in a portfolio.