OCM's Diversified Program provides our clients with the opportunity to participate in a globally diversified portfolio trading markets with low correlation, such as financial futures including currencies, 30 Year T-Bonds and 10 Yr T-Notes, stock indexes, grains, energies, fibers, livestock and precious and industrial metals.
“ Portfolios . . . including judicious investments . . . in leveraged managed futures accounts show substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds) alone.”
Dr. John Lintner,
Harvard University
The benefits of managed futures within a well-balanced portfolio include:
- opportunity for reduced portfolio volatility risk
- potential for enhanced portfolio returns
- ability to profit in any economic environment
- opportunity to participate easily in global markets
Diversification: OCM's Managed Futures portfolio tracks as many as 40 commodities in all six major categories traded on US and global exchanges. Commodities as an investment are inherently diversified by their very nature. Additionally, we use both short-term and medium-term trends adding the element of time frame diversification.
Low or Negative Correlation to Stocks and Bonds: Commodities have a low correlation (a statistical measure of how two financial vehicles move in relation to each other) to stocks and bonds meaning that when a variable has a low value, the other variable will have a high value (and vice versa).
Diversifying across markets that show low or negative correlation has been shown to provide similar returns while reducing volatility. Managed futures can also provide a hedge against inflation and overall business cycle risk which tends to affect the performance of stocks and bonds.
Ability to Perform Under Any Market Conditions: When a small percentage of one's assets is combined with a diversified portfolio of commodities, risk and return can be improved in spite of the higher volatility. Since Optimus Capital Management can trade both long and short positions, the Diversified Portfolio has the potential to profit (or lose) in both bull and bear trends worldwide. Unlike mutual funds, OCM is not limited to only buying (taking a long position), but can also sell futures and buy or sell options on futures. Speculation occurs in both bull and bear markets.
Access to Global Exchanges: Exposure to global markets is relatively easy. As a matter of fact, commodities are markets dependent upon global factors. Through our Diversified Program, OCM can capitalize on markets traded on worldwide exchanges in financial commodities futures as well as agricultural (grains, coffee, sugar, cotton), interest rate (Bonds, T-Notes), stock indices, precious and industrial metals (gold, silver, copper), energy and currency contracts.
Whereas net gains on stocks held for less than a year are treated as 100% short-term profits, the Tax Act of 1981, treats short-term profits in futures trading as 60% long-term (therefore subject to a maximum tax of 15%), and 40% short-term.
Futures investments do not require the accounting of individual trades whereas taxes on securities are on a trade by trade basis and the initial trade date and liquidation; taxes on futures are only concerned with the gross profit or loss at the end of the year.
Unrealized gains or losses at year end are marked to market (treated as realized profits or losses as of the last day of the year) and are therefore included in the net gain or loss for the year.
Losses from futures trading can be carried back up to three years against gains in prior years by filing an amended return against taxes paid in a prior year.
Investors in higher tax brackets can save as much as 30% on their taxes due to the favorable treatment afforded short-term futures trading versus stocks. Always consult a qualified tax professional for details.
Individuals, institutions and qualified pension plans such as IRA's, KEOGH's, SEP and 401K's can incorporate our managed futures program in their retirement portfolio. Please contact us or consult a professional tax advisor for details.