On August 11, 1999, a five-year study was published in the Wall Street Journal, concerning the major wire-houses with the best performance records in asset allocation. The study included Merrill Lynch, Salomon Brothers, Goldman Sachs, Dean Witter, Paine Webber, and other notable brokerage houses. The firm with the best asset allocation performance records was Goldman Sachs. Why? They were the only stock firm to include futures in their asset allocation.
Goldman Sachs and Morgan Stanley recommend up to 15% of an investment portfolio into managed futures.
According to Morningstar, in a single month, November 2000, the average diversified and technology funds lost 15.6% and 26%, respectively. The Managed Account Report Trading Advisor Qualified Universe Index was up 5.6%.
Prof. John K. Linter of Harvard University presented a landmark paper, "The Potential Role of Managed Commodity-Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds," to the Financial Analysts Federation. The research paper stated that "the improvements from holding an efficiently-selected portfolio of managed accounts or funds are so large, and the correlation between returns on the futures portfolios and those on the stock and bond portfolios are so low (sometimes even negative), that the return/risk tradeoffs provided by augmented portfolios…clearly dominate the tradeoffs available from portfolio of stocks alone or from a portfolios of stocks and bonds."
The ability of futures to enhance the returns of traditional investments has been documented in a study conducted by Goldman Sachs. Covering a 25-year period, the study concluded that by "allocating only 10% of a securities portfolio to commodities, investors can vastly improve their performance." Goldman Sachs' conclusion, concerning the value of commodities, was supported by another study published by the Chicago Mercantile Exchange (CME), one of the world's pre-eminent futures exchanges. According to the CME study, "Portfolios with as much as 20% of assets in managed futures yield up to 50% more than a portfolio of stocks and bonds alone." Next Article: Managed Futures Investment Opportunities
