What is an investment characteristic of managed futures?

Managed futures are characterized by their use of derivatives in trading various asset classes, such as commodities, currencies, and interest rates. One of the defining features of derivatives is that they operate within a zero-sum framework. In a zero-sum game, the profits of one participant come at the expense of another participant, meaning that for every winning trade, there is an equal and opposite losing trade. This characteristic highlights the competitive nature of trading derivatives and the inherent risks involved, as market dynamics ensure that gains for some investors may directly correspond to losses for others.

This understanding of derivatives as a zero-sum game outlines the overall structure and expectations when engaging in managed futures strategies, where the focus is often on profiting from price fluctuations and market inefficiencies rather than generating guaranteed returns. Consequently, the nature of managed futures investing entails significant market risk, and gains are not assured.