Managed Futures Frequently Asked Questions

Managed futures is the term used to describe an industry that is a subset of the alternative assets class where professional money managers manage client assets using the global futures and options markets as their investment medium.

A managed futures account is a trading account that is professionally managed by a Commodity Trading Advisor (CTA). Similar to a mutual fund portfolio manager in the equity and fixed income markets, a CTA has discretionary authority to make all trading decisions in accordance with their specific investment strategy. The CTA operates under a revocable power of attorney.

A CTA is a professional money manager. In accordance with their specific investment strategy, CTAs provide investors exposure to a variety of markets including, but not limited to: agricultural, energy, metals, currency, interest rate and global equity indices. CTAs apply skill based strategies and typically trade on technical indicators (price movement, trading volume and chart patterns) or on fundamental information (supply and demand data). CTAs aim to profit from moves in the futures contract price and not necessarily from appreciation in the value of the underlying asset. There are approximately 3000 CTAs registered in the United States. There are many additional CTAs operating worldwide under the regulations of their respective countries.

The managed futures industry is one of the most regulated industries within the investment world. CTAs are typically registered with both the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). Similar to a mutual fund prospectus, CTAs publish a disclosure document that includes biographical information, trading philosophy, fees, potential conflicts, risk management and performance. Each CTA′s disclosure document is filed and reviewed by the CFTC prior to public distribution. The NFA audits disclosure documents on a regular basis with a minimum of every nine months. Regulators monitor a CTA′s trading activity, reporting of performance data and distribution of promotional material. Violations of CFTC and/or NFA rules may result in financial penalties and/or the loss of that CTA′s trading privileges.

The typical CTA fees include a management fee ranging between 1% and 2% of assets under management per year and a performance fee ranging between 20% and 30% of any new profits after operating costs per quarter. Fees accrue daily and CTA performance results are presented net of these operating costs.

Quite simply, no. A realistic time horizon is very important as even the most successful professional traders experience periods of flat returns and/or drawdowns, resulting in potential losses for those trading periods. The wise investor will remain steadfast to his/her investment plan and not close the account prematurely in order to allow the account to recover from temporary losses in equity. At Foss Mountain Capital, our emphasis is on delivering multi-CTA portfolios diversified across different strategies to minimize volatility and downside risk. Controlling risk is paramount to building long term relationships with our clients.

Managed futures are not suitable for all investors. Futures investing is a speculative type of investing and like most markets, tends to be cyclical. Only risk capital should be used to invest in managed futures or any speculative investment. Risk capital is defined as capital that you do not want to lose, but if you did, your lifestyle would not be affected. High net worth and institutional investors can benefit from adding managed futures to their portfolios because, as an alternative asset class, managed futures can potentially provide valuable diversification to a traditional portfolio of equities and fixed income investments.

Over the long term, managed futures represent a class of "alternative investments" providing valuable diversification to a traditional portfolio of equities and bonds. Managed futures have been shown to provide returns with little or no relation to the timing and magnitude of the returns associated with traditional securities. In the event of a major, sustained downturn of the equity or fixed income markets, managed futures may potentially provide some protection for a client′s overall portfolio. Increasingly sophisticated institutional investors such as pension funds, endowments, foundations and family offices are allocating larger portions of their portfolios away from equity and fixed income into alternative investments.

Unlike most alternative investment opportunities, a managed futures account with Foss Mountain Capital is completely transparent with all transactions fully disclosed. Clients have the ability to view all trading online; available information includes a transaction report and month end summary of gains, losses, open positions and current account value.

Client funds are held in a Customer Segregated Account at Peregrine Financial Group (PFG), a well established Futures Commission Merchant (FCM). Founded in 1972, PFG′s global footprint includes more than 325 IBs, branches and subsidiaries, divisions in Canada, Russia and Asia, and customers, offices and affiliates in more than 80 countries.

Unlike most hedge fund agreements, a managed account offers a degree of liquidity. Excess funds are usually available on one day′s notice and can be wired to you overnight. In the event you wish to liquidate a portion or all of your account with open positions, you can instruct us to liquidate any or all open trades and have the funds dispersed. This process may take a few additional days depending upon markets traded. There are no penalties for fund withdrawals or for closing your account. Early termination fees and lock up periods may apply for certain CTAs and will be disclosed at the time of account opening. This information is also available via the CTA Disclosure Document.

Under the Open An Account section of our website, you will have the ability to download and print all the account opening documentation as well as have the option to complete the forms and open an account online. We can also physically mail or email you the appropriate account documents required. Please do not hesitate to ask for assistance.

Please contact us toll free: (877) 828-2328, Intl Call: +1 (617) 449-0039 or by Email: info@fossmountaincapital.com

To open an individual retirement account (IRA), SEP or 401k account, clients must first open a "self directed" retirement account with a custodian that accepts "non-traditional" investments.

There are a number of trust companies that provide the necessary administrative, custodial and reporting services required for a "self-directed" account to invest in a Futures "IRA" account.

Fosss Mountain Capital, LLC provides an introduction to Millennium Trust Company, LLC as a courtesy. Clients may work with the trust company of their choice as the process for establishing a "self-directed" retirement account is fairly standard.

For additional information please view the IRA/SEP/401k Complete Set account opening documents.

To request additional information or to further discuss our customized multi-strategy CTA portfolios please contact us toll free: (877) 828-2328, Intl Call: +1 (617) 449-0039 or by Email: info@fossmountaincapital.com