Managed Futures for Institutional Investors Analysis and Portfolio Construction

ISBN-10: 1576603741
ISBN-13: 9781576603741
Edition: 2011
List price: $65.00
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Description: Managed Futures for Institutional Investors will guide investors through all the important questions that need to be addressed before and while investing in this asset class. This is the essential reference guide for institutional investors  More...

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Book details

List price: $65.00
Copyright year: 2011
Publisher: John Wiley & Sons, Incorporated
Publication date: 5/3/2011
Binding: Hardcover
Pages: 351
Size: 6.50" wide x 9.25" long x 1.25" tall
Weight: 1.342
Language: English

Managed Futures for Institutional Investors will guide investors through all the important questions that need to be addressed before and while investing in this asset class. This is the essential reference guide for institutional investors interested in exploring the opportunities offered by managed futures. The book is divided into three parts. Part I is a guide to business practices in the managed futures area; part II presents the various analytical tools and building blocks required to use managed futures effectively; part III covers the important questions and issues that must be addressed in the building and evaluation of portfolios. The authors cover such issues as where to find data to evaluate managed futures, how managed futures are regulated, how to apply classic portfolio construction tools to managed futures, and how managed futures investments can help them think about and meet risk, return, and liquidity objectives. The book provides all the practical information to manage those investments well.

Galen Burghardt, Ph.D., is senior vice president and director of research for Calyon Financial . An adjunct professor of finance at the University of Chicago Graduate School of Business, Dr. Burghardt is the former vice president of financial research for the Chicago Mercantile Exchange. He is the author of The Eurodollar Futures and Options Handbook.Terry Belton, Ph.D., is managing director, and head of U.S. fixed income strategy at JPMorgan. An adjunct professor of finance at the University of Chicago Graduate School of Business, Dr. Belton was formerly director of research for Discount Corporation of New York Futures and a senior economist at Freddie Mac.

Acknowledgments
Introduction: Why Invest in CTAs?
What Kind of Hedge Fund Is a CTA?
Why Do CTAs Make Money?
How Much Should You Invest?
What About the Risks?
They're a Good Fit for Institutional Investors
How the Book Is Structured
A Practical Guide to the Industry
Understanding Returns
Risk and Cash Management
Trading, Funding, and Notional Levels
The Stability of Return Volatilities
Basic Futures Mechanics
A Typical Futures Portfolio
Where Are the Data?
The CTA Universe and Your Range of Choices
The Fluid Composition of a Database
How Backfilled Data Can Mislead
Trading Programs and Lengths of Track Records
Returns Net of Fees and Share Classes
Sources of Data for Indexes of CTA Performance
Structuring Your Investment: Frequently Asked Questions
How Many Managers Should You Choose?
What Are CTA Funds?
What Are Multi-CTA Funds?
What Are Managed Accounts?
What Are Platforms?
How Do You Compare and Contrast These Offerings?
Who Regulates CTAs?
How Are Structured Notes and Total Return Swaps Used by CTA Investors?
What Are the Account Opening Procedures for a Managed Account?
What Is the Minimum Investment in a CTA?
What Does It Mean When a Manager Is Closed?
What Are the Subscription Procedures for a Fund?
Conclusion
Building Blocks
How Trend Following Works
The Two Basic Strategies
Making the Systems Work in Practice
Transactions Costs
Other Considerations
Case Study: Two Models from 1994-2003
Rates of Return and Leverage
Commodities and Capacity Constraints
Market Environment and Give-Backs
Two Benchmarks for Momentum Trading
Data and the Trend-Following Sub-Index
Trend-Following Models
Laying the Groundwork for Analyzing Returns to Trend Following
Constructing a Portfolio
Simplifying Assumptions
How Did the Models Do?
The Newedge Trend Indicator
Next Steps
The Value of Daily Return Data
How Good Are Daily Data?
Estimating Return Volatility
Distributions of Estimated Volatility
Beware a False Sense of Confidence
What If Underlying Returns Are Highly Skewed?
Effect on Drawdown Distributions
Every Drought Ends in a Rainstorm: Mean Reversion, Momentum, or Serial Independence?
A Focus on Conditional Returns
The Costs of Being Wrong about Timing Investments Can Be Substantial
The Data
The Test Tally
Test for Serial Dependence: Autocorrelation
Test for Serial Dependence: Runs
Conditional Return Distributions
Conclusion
Understanding Drawdowns
Drawdown Defined
What Should They Look Like?
What Forces Shape the Distributions?
The Distribution of All Drawdowns
The Distribution of Maximum Drawdowns
The Core Drawdown Function
Empirical Drawdown Distributions
Reconciling Theoretical and Empirical Distributions
Putting a Manager's Experience in Perspective
What about Future Drawdowns?
Further Questions
How Stock Price Volatility Affects Returns
A Look at Historical Returns
Stock Price Volatility and Returns on the S&P 500
S&P 500 Volatility Dominates Market Volatility
CTA Returns, Correlations, and Volatility
Conclusion
The Costs of Active Management
Forgone Loss Carry-Forward
Liquidation and Reinvestment
Other Costs
Conclusion
Measuring Market Impact and Liquidity
A Very Fat Data Set
A Representative Market Maker
Fitting the Curve to the Data
Hidden Liquidity
Estimating the Risk-Aversion Parameter
Volume, Volatility, and Market Impact Profiles
Where Do We Go from Here?
Appendix
Portfolio Construction
Superstars versus Teamwork
The Contribution of Low Correlation to Portfolio Performance
How Reliable Are Correlation Estimates?
The Contest
Dropping and Adding Managers
The Value of Incremental Knowledge about Return Distributions
The Costs of Dropping and Adding Managers
A New Look at Constructing Teamwork Portfolios
Why Look Back?
A Fresh Look at the Original Research
Two New Approaches
Comparing the Four Approaches
Reviewing the Results
Correlations and Holding Periods: The Research Basis for the Newedge AlternativeEdge Short-Term Traders Index
Review of Previous Research
Index Methodology and Construction
How Low Are the Correlations?
Why Are the Correlations Low?
Holding Period and Return Correlation
Why Are There Not More Short-Term Traders?
Replicating the Index
Cautions and Managing the Index
Conclusion
Appendix
�There Are Known Unknowns�: The Drag of Imperfect Estimates
Improving Risk-Adjusted Returns
Throwing Out the Losers
Due Diligence and Evaluation
Bibliography
About the Authors
Index

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