Managed Futures: Single Manager Strategy
Managed Futures: Single Manager Strategy

Managed Futures: Single Manager Strategy

 
 
 
Summary

Provides qualified investors access to one commodity trading advisor oftentimes with lower investment minimums and trading advisor management fees than might otherwise be attained through a direct investment with the trading advisor.

 
 
Investment Approach
Philosophy

Ceres Managed Futures LLC ("Ceres"), an affiliate of Morgan Stanley Investment Management, serves as general partner and commodity pool operator to Morgan Stanley's managed futures funds.  

In general, the primary objective of the funds managed by Ceres is to provide absolute returns that diversify an investor’s portfolio with low to no correlation to traditional investments (i.e., equities and fixed income) and other alternative investment strategies. Fund-specific investment objectives, targeted risk/return attributes, and expectation profiles vary, dependent upon, but not limited to, the following:

• Single manager vs. multi-manager

• Diversified vs. sector/market/style specific

• Investor defined volatility targets

The ultimate goal of Ceres' investment process is to identify and allocate assets to registered commodity trading advisors ("CTAs") who have the potential to add value to the funds and an investor's portfolio from both an absolute return and diversification standpoint. 

 
Differentiators
Experience and expertise

Ceres' team consists of highly experienced and knowledgeable professionals dedicated exclusively to the structuring and monitoring of fund portfolios allocating to registered commodity trading advisors ("CTAs").

Reputation

Given Morgan Stanley's worldwide brand recognition and Ceres' strong reputation and presence in the managed futures industry, CTAs and other service providers are quite often willing and accommodating in order to have the opportunity to be business partners with us.

Extensive Product Platform

Our wide-ranging set of product offerings provides qualified individual and institutional investors with the potential to meet their investment objectives and help diversify traditional and alternative investment portfolios.

Comprehensive Due Diligence and Manager Selection Process

In order to be considered and selected for inclusion in one of our funds, a CTA must endure a thorough investment and operational due diligence review, as well as demonstrate attributes (pedigree/background, trading approach, technology, etc.) that help to differentiate them from other CTAs in the funds and across the managed futures industry.

 
 
 
Investment Process
1
Sourcing

CTAs who are candidates for a potential investment allocation from our funds are sourced from Ceres' expansive network of contacts, as well as identified through screening of databases and from various industry related events and conferences.  In order to qualify for investment consideration, a CTA must first meet specific minimum criteria related to length of track record, assets under management, and investor concentration levels. The team's investment professionals actively monitor the CTA universe and maintain an ongoing dialogue with CTAs to remain informed of new entrants into the industry, the evolution of organizations and trading strategies, CTA performance relative to the current economic environment / market cycle, product innovation and application, and distribution trends.

2
Due Diligence & Analysis

Ceres conducts comprehensive due diligence of all CTAs considered for potential addition as an advisor to one or more of our funds.  Due diligence of the CTA consists of a quantitative analysis and qualitative review of various aspects of a CTA, including, but not limited to:  investment strategy and trading approach;  historical returns  (performance over various time periods, sector/style attribution, absolute and relative returns, etc.), risk attributes (volatility measures, decline periods, portfolio efficiency, etc.); correlations versus other CTAs and asset classes; margin and leverage utilization; research processes; adherence to policies and procedures; organizational structure and personnel; primary third-party service providers; technology; contingency operational capital; and disaster recovery plans.

3
Portfolio Construction and CTA Selection

When constructing a portfolio, we initiate the process by defining the risk/return objectives and our long-term expectations. CTAs are then selected based upon whether or not we believe they have the potential to help the fund meet its objectives, enhance its risk/return ratio, minimize the magnitude of its drawdowns, or provide it with additional trading style or market diversification.  The confidence we have in the CTAs we select relies upon our due diligence process, as well as on additional analysis we perform including analysis of the CTAs' performance relative to a fund's fees and the fee terms we negotiate with the CTAs, review of correlations to the other CTAs in the fund's portfolio, and determination of what specific market instruments will be traded in the fund in order to adhere with regulatory requirements.

4
Approval and Governance

All proposals for a new fund or to add a CTA to a fund must first be reviewed by Ceres' Investment Management Committee and then presented to Ceres' Board of Directors for consideration and approval.

5
Ongoing Portfolio Management and Monitoring

Ceres views portfolio management and risk monitoring as equally as critical as the initial due diligence and portfolio construction processes.  As such, we assess, assign, and manage risks in several ways, relying upon assorted means to do so. For instance, once a fund allocates to a CTA and trading is initiated, Ceres actively monitors the CTA and underlying fund(s) on an ongoing basis ranging from intra-day real-time performance, market, and trade monitoring to daily next day review and analysis of P&L, margin commitments, positioning, and trading.  Longer-term strategic evaluations of a CTA are also conducted, particularly in relation to a CTA's performance relative to its historical profile, its peer group, and Ceres' overall expectations.  This includes various reviews performed monthly, quarterly, annually, and "as warranted".  Likewise, tactical portfolio rebalancing and allocation adjustments are implemented as often as monthly to account for the current market environment and, subsequently, the potential opportunities and underlying risks to the funds and CTAs.

 
 
Portfolio Managers
Head of Managed Futures
26 years industry experience
Executive Director
26 years industry experience
 
 
Insights
Investment Insight
Are Managed Futures the Same as Hedge Funds?
Sep 30, 2017
The Managed Futures Team makes the case that managed futures are not the same as hedge funds and that they should have a unique place within a diversified portfolio.
 
 
 
 

Alternative investments are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for long-term investors willing to forego liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid – there is no secondary market for private funds, and there may be restrictions on redemptions or assigning or otherwise transferring investments into private funds. Alternative investment funds often engage in leverage and other speculative practices that may increase volatility and risk of loss. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors.

This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for you.  The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.  There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. 

Any views and opinions provided are those of the managed futures team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.  Past performance is no guarantee of future results.

In the ordinary course of its business, Morgan Stanley engages in a broad spectrum of activities including, among others, financial advisory services, investment banking, asset management activities and sponsoring and managing private investment funds. In engaging in these activities, the interest of Morgan Stanley may conflict with the interests of clients.

Funds of funds often have a higher fee structure than single manager funds as a result of the additional layer of fees. The investment strategies described in the preceding pages may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required.

No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate. 

 

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