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Enhance returns and reduce portfolio volatility
Managed futures1 have delivered greater long-term returns – and have exhibited greater volatility – than government bonds. We might expect, therefore, that adding them to a traditional portfolio would increase both the portfolio’s returns and its volatility.
According to a study by two in-house academics at Allianz Global Investors, however, an allocation to managed futures can both enhance the long-term returns and – at the same time – significantly reduce the volatility of a portfolio of traditional assets.
1 Managed futures are a type of alternative investment in which a portfolio of publicly-traded derivatives is actively managed by professional investors, usually according to an automated programme.