Individual Investors
As the world's leading futures and options broker, we provide individuals with access to all the major commodities, securities and derivatives markets. Our suite of electronic platforms, exceptional client support and value-added services enable our clients to trade in the way that is most comfortable and appropriate for their needs.
RCM Asset Management specializes in providing brokerage services to futures and options traders. It is the only thing we do and we believe we are the best in the world at it. We start by understanding that all futures traders are individuals first and foremost - which is precisely why we offer a variety of account plans and service options from which traders can select to customize their trading experience.
For specifics on each of the six different account plans we offer, click on the links to the right.
Online
The RCM Asset Management Group offers deep discount, online self-directed trading for traders who know how to make their own trading decisions and place their own orders. The thing that sets us apart from other deep discount brokers is that you get low commission rates and you also have access to the RCM Asset Management brokers at no additional cost. With every online account, clients have access to a night trading desk and 24hr technical support. The advantages of our electronic trading are:
- 24hr online execution
- Access to both pit and electronic markets
- Special Orders ( Contingents, OCOs, Brackets)
- Up-To –The Minute Market Analysis
- Daily Research valued at more than $1,000
- Flash Fills in Most Major Markets (During Normal Market Conditions)
- Exchange Minimum Margins ( Subject to change without Notice)
- Use of T-Bills as Margin
- A variety of front-end trading platforms
- Customer Account Statements
Discount
The RCM Asset Management Group offers discount service for self-directed traders who know how to make their own trading decisions and place their own orders. With every account clients get access to the highly sought after RCM Asset Management trade desk. Clients can execute both pit and electronic commodities over the phone 24hr a day. The advantages of our discount service are:
- Structured Trades (Hedges, complex trading strategies, etc.)
- Real Time Phone Quotes
- Delayed Quotes and Charts on our website
- Special Access to Hand-Picked Floor Brokers
- Up-To-The minute market Analysis
- Market Research valued at more than $1,000
- Floor access to high volume traders
- Exchange Minimum Margins (subject to change without notice)
- Use of T-Bills as Margin
- Customer Account Statements
Full Service
Our full service plan is for clients that use a high degree of personalized guidance and direction. From developing trading strategies, to teaching proper order entry procedures, our full service program assists with nearly all of the trading process. Full service customers receive an extensive array of personalized quality services and support. Some of these services are:
- Detailed Analysis and Specific Trade Recommendations
- Faxed Charts, Data, Reports, News an more
- Order placement assistance and Instruction
- Help with Stop Placement
- Risk and Money Management
- Real Time Phone Quotes
- Up-To-The minute market Analysis
- Market Research valued at more than $1,000
- Delayed Quotes and Charts on our Website
- Customer Account Statements
- Use of T-Bills as Margin
- Exchange Minimum Margins (subject to change without notice)
- Fully Staffed 24-hr Desk
- And More!!
Contact us to learn more about our full service account today.
Broker Assisted
Get some extra attention from the RCM Asset Management Team with every Broker Assisted Account! We work with you on trade ideas. You provide the analysis and the market and we will work out all the details. We will use a combination of technical and fundamental analysis to assist you in your trade placement. Some of the advantages of our broker assisted service are:
- Detailed Broker Analysis
- Structured Trades (Hedges, complex trading strategies, etc.)
- Faxed Charts
- Real Time Phone Quotes
- Order Placement Assistance and Instruction
- Help with Stop Placement
- Risk and Money Management
- Real Time Phone Quotes
- Delayed Quotes and Charts on our website
- Up-To-The minute market Analysis
- Market Research valued at more than $1,000
- Exchange Minimum Margins (subject to change without notice)
- Use of T-Bills as Margin
- Customer Account Statements
Managed Futures
What are Managed Futures?
The term managed futures describes an industry made up of professional money managers known as commodity trading advisors (CTAs). As investors look for greater diversity in their portfolios, these trading advisors manage client assets on a discretionary basis using global futures markets as an investment medium. Investment management professionals have been using managed futures for more than 30 years. More recently, institutional investors such as corporate and public pension funds, endowments and trusts, and banks have made managed futures part of a well-diversified portfolio.
Four Benefits of Managed Futures
- Reduced Portfolio Volatility Risk. The primary benefit of adding a managed futures component to a diversified investment portfolio is that it may decrease portfolio volatility risk. This risk-reduction contribution to the portfolio is possible because of the low to slightly negative correlation of managed futures with equities and bonds. One of the key tenets of Modern Portfolio Theory, as developed by the Nobel Prize economist Dr. Harry M. Markowitz, is that more efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations.
- Potential for Enhanced Portfolio Returns. While managed futures can decrease portfolio volatility risk, they can also simultaneously enhance overall portfolio performance. Adding managed futures to a traditional portfolio can help to improve overall investment quality. This is substantiated by an extensive bank of academic research, beginning with the landmark study of Dr. John Lintner of Harvard University, in which he wrote that “The combined portfolios of stocks (or stocks and bonds) after 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.” (Lintner, John, “The Potential Role of Managed Commodity Financial Futures Accounts (and/or Funds) in Portfolios of Stocks and Bonds,” Annual Conference of Financial Analysts Federation, May 1983)
- Ability to Take Advantage of Any Economic Environment. Managed futures trading advisors can take advantage of price trends. They can buy futures positions in anticipation of a rising market or sell futures positions if they anticipate a falling market. For example, during periods of hyperinflation, hard commodities such as gold, silver, oil, grains, and livestock tend to do well, as do the major world currencies. During deflationary times, futures provide an opportunity to profit by selling into a declining market with the expectation of buying, or closing out the position, at a lower price. Trading advisors can even use strategies employing options on futures contracts that allow for profit potential in flat or neutral markets.
- Ease of Global Diversification. The establishment of global futures exchanges and the accompanying increase in actively traded contract offerings has allowed trading advisors to diversify their portfolios by geography as well as by product. For example, managed futures accounts can participate in at least 150 different markets worldwide, including stock indexes, financial instruments, agricultural products, precious and nonferrous metals, currencies, and energy products. Trading advisors thus have ample opportunity for profit potential and risk reduction among a broad array of non-correlated markets.
Types of Investment Opportunities
According to the Barclay Trading Group, Ltd. in 2006, it was estimated that over $170 billion was under management by futures trading advisors worldwide. Currently, there are three primary categories of managed futures.
Individual Accounts are usually opened by institutional investors or high net worth individuals. These funds usually require a substantial capital investment so that the advisor can diversify trading among a variety of market positions. An individual account enables institutional investors to customize accounts to their specifications. For example, certain markets may be emphasized or excluded. Contract terms may include specific termination language and financial management requirements.
Private Pools commingle money from several investors, usually into a limited partnership. Most of these pools have minimum investments ranging from approximately $25,000 to $250,000. These futures partnerships usually allow for admission-redemption on a monthly or quarterly basis. The main advantage of private pools is the economy of scale that can be achieved for middle-sized investors. A pool also may be structured with multiple trading advisors with different trading approaches, providing the investor with maximum diversification. Because of lower administrative and marketing costs, private pools have historically performed better than public funds.
Public Funds or Pools provide a way for small investors to participate in an investment vehicle usually reserved for large investors.
Participants in the Managed Futures Industry
There are several types of industry participants qualified to assist interested investors. Keep in mind that any of these participants may, and often do, act in more than one capacity.
Commodity Trading Advisors (CTAs) are responsible for the actual trading of managed accounts. There are approximately 800 CTAs registered with the National Futures Association (NFA), which is the self-regulatory organization for futures and options markets. The two major types of advisors are technical traders and fundamental traders. Technical traders may use computer software programs to follow pricing trends and perform quantitative analysis. Fundamental traders forecast prices by analysis of supply and demand factors and other market information. Either trading style can be successful, and many advisors incorporate elements of both approaches.
Futures Commission Merchants (FCMs) are the brokerage firms that execute, clear, and carry CTA-directed trades on the various exchanges. Many of these firms also act as CPOs and trading managers, providing administrative reports on investment performance. Additionally, they may offer customers managed futures funds to help diversify their portfolios.
Commodity Pool Operators (CPOs) assemble public funds or private pools. In the United States, these are usually in the form of limited partnerships. There are approximately 1,500 CPOs registered with the NFA. Most commodity pool operators hire independent CTAs to make the daily trading decisions. The CPO may distribute the product directly or act as a wholesaler to the broker-dealer community.
Investment Consultants can be a valuable institutional investor resource for learning about managed futures alternatives and in helping to implement the managed fund program. They can assist in selecting the type of fund program and management team that would be best suited for the specific needs of the institution. Some consultants also monitor day-to-day trading operations (e.g., margins and daily mark-to-market positions) on behalf of their institutional clients.
Trading Managers are available to assist institutional investors in selecting CTAs. These managers have developed sophisticated methods of analyzing CTA performance records so that they can recommend and structure a portfolio of trading advisors whose historic performance records have a low correlation with each other. These trading managers may develop and market their own proprietary products or they may administer funds raised by other entities, such as brokerage firms.
Evaluating Risk from an Investor’s Perspective
Investors should understand that there are risks associated with trading futures and options on futures. The Commodity Futures Trading Commission (CFTC) requires that prospective customers be provided with risk-disclosure statements which should be carefully reviewed. Past performance is not necessarily an indicator of future results.
Potential investors will want to become familiar with industry definitions for evaluating the risk-return element of managed futures performance. The following equations, with some variations, are often used.
Measure of Volatility
Standard Deviation: The dispersion (distance) of observations (performance data) from the mean (or average) observation. This measure is often expressed as a percentage on an annualized basis.
Measure of Capital Loss
Largest Cumulative Decline or Maximum Drawdown: The largest cumulative percentage (peak-to-valley) decline in capital of a trading account or portfolio. This measure of risk identifies the worst-case scenario for a managed futures investment within a given time period.
Measure of Risk-Adjusted Return
Sharpe Ratio: A ratio that represents a rate of return adjusted for risk, calculated as follows: Annualized rate of return – Risk-fee Rate of return Annualized standard deviation
How the Fee Structure for Managed Futures Works
Total management fees in the managed futures industry tend to be higher than those in the equities market. These fees, however, may be partially offset by the lower commission costs for comparable dollar transactions in the futures industry. While management fees do vary by the type of managed futures account and may be negotiable, there is a general fee structure. Investors should understand that performance information for a managed futures account or fund is almost always expressed net of all such fees.
Typically, the trading advisor or trading manager is compensated by receiving a flat management fee based on assets under management in addition to a performance “incentive” fee based on profits in the account. The performance fee is almost always calculated net of all costs to the account, such as management fees and commissions. The performance fee is thus based on net trading profits, which are usually paid only if the account or fund exceeds previously established net asset values.
A few trading managers assume the “netting risk,” whereby the performance results of all trading advisors in the account are netted before the investor is charged a performance fee. The trading manager assumes the netting risk by paying each CTA according to his or her individual performance.
In addition to management and performance fees, an account or fund pays transaction costs or brokerage commissions. These expenses reflect the cost of executing and clearing futures and generally are calculated on a per-round-turn basis.
Contact us for performance profiles on more than 100 professional money managers.
Resources
Reporting ServicesBarclay Trading Group, Ltd. International Traders Research, Inc. Mount Lucas Management Corporation Managed Account Reports (MAR) |
Industry AssociationsManaged Funds Association (MFA) Futures Industry Association (FIA) |
Regulatory AgenciesCommodity Futures Trading Commission (CFTC) National Futures Association (NFA) |