If you are an alternative investment manager or an advisor looking to include managed futures as a part of client’s asset allocation, you might want to know a little about the history of the managed futures market.
RCM is a registered commodity brokerage firm; it looks to help high net worth individuals, RIAs, and institutional investors find and invest in commodities and managed futures.
Why a Futures Market?
According to RCM, “Futures markets started in earnest in the late 1800s in Chicago as a way for the grain and cattle farmers of the Midwest U.S. to insulate (hedge) them from adverse price moves between the time they planted their crops and the time they brought their crops to market.
“The farmers of yesteryear were better able to plan their planting, decide how many cattle to slaughter/breed, and so on if they could lock in the price they would earn on those goods today, giving launch to futures contracts which guaranteed the farmer the ability to sell his crop at the agreed to price when harvest time game.”
The Turtle Traders
RCM’s history recounts the story of the Turtle Traders of the early 1980s. “It was the basic outline of the philosophy that virtually all trend followers adhere to today (the long volatility profile which exchanges small but frequent losses for rare but much larger gains), but in the early 1980s, it was somewhat revolutionary.”
The Origin of the Fab Three
The big British players in managed futures – AHL, Man Group, Winton – whose programs now manage more than two-thirds of the approximately $330 billion futures market, got started with a push from the owner of a London sugar brokerage who wanted a better way to organize his commodity trading charts. (source: BarclayHedge, assets as of December 2015.)
“The British market began,” said the RCM report, “With the then radical idea of coding trading rules into computers to systematically test, analyze, and execute trading strategies.”
The Story of John W. Henry
The short history also recounts what happened to John W. Henry before and after he bought the Boston Red Sox – from futures titan to World Series victory, with great gains and large losses in between.
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