Investment in managed futures strategies is on the rise as asset owners tap into the equity risk reduction and downside protection inherent in systematic trend-following approaches.
Institutional investors have been pumping assets into managed futures strategies, with especially strong asset gains in the early months of 2017.
Net inflows into managed futures strategies in the quarter ended March 31 were $4.9 billion; total assets under management in the category, including investment gains/losses, rose 2.2% from $125.8 billion as of Dec. 31, showed data from eVestment LLC, Marietta, Ga.
At the current pace, net inflows into managed futures in 2017 could reach $19.7 billion, a 94% increase over net inflows into the category in 2016 and the largest one-year increase since eVestment began tracking the category in 2009. If the pace continues, total managed futures assets could top $145 billion, the highest since 2012 when assets totaled $177.7 billion.
The appeal of managed futures strategies for institutional investors is “their unique returns, which are uncorrelated to long-only strategies, commodities and other hedge funds,” said Yao Hua Ooi, a principal in AQR Capital Management LLC's global asset allocation team and a managed futures portfolio manager.
“Managed futures tend to do well in prolonged downturns, such as from 2000 to 2002 and in 2008, and bring tail-risk protection,” Mr. Ooi said, stressing many institutional investors “still have a huge downside risk in their portfolios through high equity exposure. Managed futures can help by adding diversification to portfolios.”
Greenwich, Conn.-based AQR manages $20 billion in managed futures in various formats.