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By A.J. D'Asaro | 09-25-2014 01:00 PM

What Is a Managed Futures Fund?

Exposure to managed futures can bring uncorrelated returns and a systematic approach to portfolios, says Campbell & Company president Mike Harris.

Securities mentioned in this video
EBSAX Equinox Campbell Strategy A

A.J. D'Asaro: Hi, this is A.J. D'Asaro for Morningstar, and today's focus is managed futures funds.

Joining me today is special guest Mike Harris, president of , one of the leading managed futures hedge funds, and who has recently launched a product under the name Equinox Campbell Strategy in the mutual fund space. Mike thanks for joining us.

Mike Harris: Thanks for having me.

D'Asaro: Mike, for the uninitiated here, what is a managed futures fund?

Harris: A managed futures fund is a liquid alternative investment that really helps to smooth the ride in the portfolio because of the uncorrelated nature of the returns, particularly to traditional assets like stocks and bonds.

Oftentimes we tell people that some of the benefits of managed futures is that it's actively managed, which means it doesn't have a bias to be long-only like many products in investors' portfolios. It can effectively make money in both rising and falling markets from its ability to be both long and short. Oftentimes it's traded in a systematic fashion. So, we're using models to trade the markets, and we're using science and data to back-test those returns.

And I think, probably one of the biggest benefits is that it truly is both global as well as trading all four of the major asset classes. So, in addition to stocks and bonds, most managed futures funds, including the Campbell strategy fund, also access both the currency and the commodity markets, which really gives true diversity to an investor's portfolio.

D'Asaro: So managed futures funds trade many asset classes systematically. I feel that the systematic part is something that investors aren't very familiar with. Can you expand on what the difference is to be a systematic fund versus something investors might be used to?

Harris: Most investors are probably more used to the discretionary approach, where human beings, portfolio managers, make decisions around the markets they are going to trade and things like timing.

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