An Institutional Overview of Managed Futures

Hot off the strong performance of Managed Futures in 2016, Preqin has released their 10,000 foot look at Managed Futures and its ongoing relationship with institutional investors. Here are the key factors that reflect how institutional investors are treating Managed Futures.

An Institutional Overview of Managed Futures

Those numbers look very optimistic for the Managed Futures community. Managers in the space should feel good about the fact that 69% of investors think that their clients return expectations have been met. Which is probably why half of those surveyed say they plan to increase their exposure to managers in 2016. But these numbers weren’t always this high. Preqin says that even after a strong 2014 performance, not too many investors were looking to double down on their investment, and some were looking to decrease their exposure.

At the start of 2015, Preqin noted that demand for CTAs from investors would be relatively small in the year ahead. Our H1 2015 Investor Outlook, based on interviews with over 300 investors, showed that just 14% of CTA investors planned to increase their allocations over 2015, with 10% planning to decrease their exposure. However CTAs witnessed $25.4bn of infl ows during 2015, with 52% of existing CTAs showing net infl ows over the year, a greater proportion than hedge funds (41%).

This is a fantastic reminder to managers, to introducing brokers, that demonstrating clear defined expectations is an important factor to growing your business. That customer care leads to more business. That investors want to trust but verify before allocating more money. It seems that the industry has been doing just that. While there’s been a lot of talk about money flowing into liquid alternatives, the number of institutional investors choosing Managed Futures is growing (and has been since 2008).

Institutional Overview of Managed Futures

This is on top of the fact that The Preqin report explained that there have been more funds that were liquidated than new CTAs. However, they explain that many managers in the space are focusing on launching new funds, rather than people trying to start new CTAs.

In 2015, we have seen relatively few new launches in the managed futures sector, as CTAs focus on existing products or fund managers on other strategies.

Not so long ago… we were hearing about a “shift” in institutional investors looking away from alternatives after CalPERS exited their hedge fund allocations. We’ve also seen many big name managers close their funds, people saying Trend Following is Dead, that the fees are too high, orthat it’s too complex.

It seems that institutional investors are seeing through the smoke screen… and seeing that Managed Futures provides not only non-correlated allocation to their portfolio but gives them an allocation to multiple different asset classes all at once, in one allocation.

We look forward to seeing if those investors end up increasing their allocations in 2016, and how many new institutional investors make new allocations to the industry.