Today’s
Commodity Trading Advisor is no longer to be thought of only as a Portfolio
Manager. His role has expanded
considerably as investment products become more complex.
Commodity Trading Advisor, Genuine Trading Solutions, a registered CTA
with the CFTC, says the role today of a CTA is constantly evolving.
Dwayne Strocen, President of Genuine Trading Solutions says once upon a
time a Commodity Trading Advisor was content to be known as a Portfolio Manager
trading commodities and futures for a managed futures fund. There is no question today’s investor has
become more sophisticated. In response,
today’s selection of investment products has become ever more complex and
varied, the need for the CTA to understand the uses and management of these
products becomes even more acute.
So what exactly is the role of today’s
Commodity Trading Advisor. Certainly
trading of derivative products for a managed futures fund continues to be as
important as before. A CTA has also
become more involved with derivative analytics. This role is essentially focused upon becoming an analyst to
structure and analyze the more multi-faceted requirements demanded by hedge
funds, pension funds and structured products.
The use of derivative analytics to manage the adverse risk of an equity
or bond portfolio brought about by adverse market conditions is critical in
preserving asset growth. The uses of
hedging to prevent volatility has long been understood by the largest
institutions but is now available to the smaller sized company and to the
individual investor. No doubt as
products continue to evolve so too will the CTA evolve to meet the need of
today’s professional money manager.
Derivative products are no longer limited to exchange traded
commodities futures and options. There
continues to be an ever expanding list of over-the-counter derivative
products. These are SWAPS. SWAPS and privately transacted products
transacted without the use of a recognized exchange. The difficulty is the buyer and seller must find each other to
undertake such an arrangement, not always easy. The second problem is no liquidity. There is no one to sell this too should one of the parties wish
to terminate the transaction prior to the agreed upon date.
A Commodity Trading
Advisor’s role is no longer sufficient to be limited to trading. It is now imperative to understand the
industry in a new light so to understand the changing investment environment. Analysis now becomes the catalyst to include
a value added service to retain customers.
This includes structured products, risk management and OTC
derivatives. Continuing education has
been and continues to be the hallmark of the best in the industry.
Dwayne Strocen is a registered Commodity Trading Advisor specializing
in analyzing and hedging Market and Operational Risk using exchange traded and
OTC derivatives. Website: http://www.genuinecta.com/
