How to protect portfolios when markets are in turmoil

Institutional investors like to add non-correlating strategies to protect their portfolios for times when markets are in turmoil. They invest in commodity trading adviser strategies or CTA’s. They offer diversification benefits.

Once investors decided to invest in CTA strategies they usually allocate to only one or two managers. Investors frequently overlook the value of diversification when it comes to investing in managed futures. Some of the reasons for this approach include:

Large trend-following managers tend to perform similar since they are highly correlated.

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