Frequently asked questions about managed futures and Tricycle's Managed Futures Notes.
Q: What are managed futures?
A: The investing in futures contracts by professional managers who invest in the global futures markets, as either buyers or sellers of real assets such as gold, silver, wheat, corn, crude oil and natural gas, as well as financial assets such as government bonds, currencies and stock market indices.
Q: Who are your futures traders?
A: Tricycle Asset Management hires and manages professional investment management organizations (CTAs or Futures Traders) that specialize in investing in commodities and futures markets on a discretionary basis. These managers trade on global markets (up to 50 futures exchanges) and are buyers or sellers in areas such as gold, crude oil, wheat, $US, Japanese Yen, etc. using futures contracts.
Q: What have returns been like in the past?
A: Historically, managed futures have had strong average annual returns over the long term.
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Proven Long-Term Performance
January 1980 to March 2007
1Barclay CTA Index adjusted for CDN T-Bills. Prior to July 1, 2005, the benchmark was the CISDM Fund/Pool Qualified Universe Index adjusted for CDN T-Bills.
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Q: What volatility can one expect from Managed Futures?
A: The standard deviation of this asset class is equivalent to that of the TSX (S&P/TSX Composite Index 10.56% and managed futures 11.90%, 27 years ending March 2007); but diversifying your portfolio by including 10% to 20% managed futures is an excellent way to mitigate overall risk - as the product has the potential to profit in rising or falling markets.
Q: Can Managed Futures Notes be bought in a Stand-Alone RRSP or RRIF?
A: Yes. Managed futures are an ideal way to further diversify your RRSP and offer exposure to global markets. Moreover, Tricycle provides the option of transferring your RRSP in Managed Futures Notes into a self-directed RRIF. Certain restrictions apply for meeting withdrawl requirements. Please refer to Section 6 of the RRIF application.
Q: How do managed futures differ from hedge funds?
A: Futures contracts are traded on established, approved futures exchanges (not over the counter), are liquid instruments in liquid markets, leverage is predefined and monitored and we see the positions daily (transparency).
Q: If the product is sold before maturity, could the gain be deemed to be a capital gain rather than "ordinary income"?
A: Any increase in value realized is taxable as income at the investor’s full marginal rate in the year of sale, redemption or maturity. Investors may also realize a capital gain (or capital loss) if the notes constitute a capital property to the investor.
Q: Is the Net Asset Value (NAV) calculated in Canadian dollars?
A: Yes. Performance statistics are posted daily on this website once the product has been launched.
Q: Is the contract with Tricycle or the issuer?
A: Tricycle Asset Management has developed the product, but as an investor in Managed Futures Notes, the contract you have is with the Business Development Bank of Canada (Series N-4 through N-8) or The Canadian Wheat Board (Series N-9 through N-12). The guarantee on the Notes carries the full faith and credit of the Government of Canada.
Q: What are futures contracts?
A: Futures contracts are legally binding agreements to buy or sell commodities or financial assets for a certain price at a later date.
Professional futures traders closely monitor upward and downward trends of these real or financial assets and invest (buy or sell) accordingly on recognized global futures exchanges. As investors in futures contracts, professional futures traders virtually never take possession of the commodities.
The futures exchanges are highly liquid.
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