Managed futures on the rise as investors chase diversification

Managed futures has grown to become the single largest strategy in the hedge fund universe. Strong inflows and performance have helped make it a popular diversifier for many portfolios.

In 1983 Harvard professor John Lintner published a seminal paper illustrating how an allocation to managed futures could dramatically improve the risk adjusted returns of an investment portfolio. Twenty-seven years later managed futures has become an investment vogue and allocations to the strategy are growing at a spectacular pace.

Commodity trading advisers (CTAs) running managed futures programs experienced record inflows in 2010, according to data from BarclayHedge. Combined assets managed by