By: Dean Hoffman+

When choosing a Managed Futures Commodity Trading Advisor (CTA) to invest with, one group that must be considered is emerging CTA’s. An emerging CTA is one whose track record is less than five years long and has less than $100 million dollars under management. Although it is often most comfortable to invest in managed futures with a CTA that possesses a long and successful track record and has hundreds of millions of dollars under management, there can be real benefits to investing with an emerging CTA.

Managed Futures – Emerging CTA Benefits

Investing with emerging managed futures CTAs can have benefits such as better risk adjusted returns. This is attributable to emerging CTA’s not being weighed down by their size. Specifically, emerging CTA’s can move into and out of markets easier and are able to trade markets that are not liquid enough for large CTA’s. My research has clearly shown me that being able to trade more markets is a tremendous benefit. Large CTA’s are confined to only trading markets such as financial instruments, energies and metals. They end up missing out on opportunities in many other traditional commodity sectors such as grains like soybeans, corn and wheat and foods such as coffee, sugar, cocoa, cattle, pork and fibers like cotton. Once again, missing out on these markets can come at a great price.

An added benefit with emerging CTAs includes smaller minimum account sizes. For example, Hoffman Asset Management Inc. will trade a diversified portfolio of over 70 markets with a minimum account size of only $125,000. This is in contrast to more established CTAs, they usually have minimums of $1,000,000 or more. .

Managed Futures – Summary of Emerging CTA Benefits

In summary, when you combine the benefits of potentially better performance and smaller minimum account sizes you can see that the emerging CTA can represent the ideal solution for many investors.