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The greatest benefit of managed futures is not instantly apparent. Only through the inevitable ups and downs of the markets will the true balancing effect of managed futures be demonstrated. Historically, the balancing effect (non-correlation to stocks and bonds) intensifies after three years -- and even more so after five.
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The Balancing Effect - During Bear Equity Markets
Stock Market Monthly Declines of at Least 4%
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(January 1980 to March 2007)
As this Balancing Effect chart indicates, owning managed futures1 (navy bars) would have helped offset losses during the 36 stock market downturns of 4% or more (grey, representing the S&P/TSX Composite Index) from January 1980 to March 2007.
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The Balancing Effect - During Bull Equity Markets
Stock Market Monthly Increases of at Least 4%
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Of course, diversification for its own sake means little without good performance. Historically, managed futures have had higher average annual returns than stocks or bonds.
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Historical Performance
| Managed Futures1 |
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11.90% |
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| S&P/TSX Composite Index |
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10.56% |
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Average Annual Return (January 1980 to March 2007)
1 January 1980 to March 2007. Barclay 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.
2 S&P/TSX Composite Index.
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