Why Hatteras Added Managed Futures

Chidem Kurdas

Fund of funds firm Hatteras added managed futures to its Alpha Hedged Strategies mutual fund. Until this change, the fund had a 34% allocation to long/short equity and the rest of the assets were invested in market neutral, relative value and event driven strategies.

Hatteras Funds executives say they are responding to the needs of financial advisers and clients by adding managed futures and introducing an institutional share class. President Robert Worthington points out that managed futures historically had low correlation to stocks and bonds. By contrast, long/short equity, that mainstay of many portfolios including this Hatteras fund, has historically followed the stock market fairly closely.

Investors and advisers became more interested in managed futures after 2008—because it was one of the very few strategies to make positive returns amid the crisis. Managed futures tends to move in opposition to stocks. That looks very good when stocks are slumping and managed futures rising.

But of course the equity market went up a lot of the time and in that kind of environment managed futures often does not perform well. Hence in the past many investors and in particular funds of funds stayed away from managed futures.

Now as equities wilt, the diversification benefit of managed futures is particularly inviting. Though the strategy is down slightly for September and year to date, it has done better than most other strategies.

No wonder in the current market advisers want managed futures in the mix.

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