Commodity Trading Advisors (CTAs): What is their role?
Commodity Trading Advisors are no longer viewed as just Portfolio Managers. fxcm.my/komoditi/ As investment products have become more complex, his role has grown considerably.
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Commodity Trading Advisor, Genuine Trading Solutions, a registered CTA with the CFTC, says the role today of a CTA is constantly evolving.
Dwayne Strochen, the President of Genuine Trading Solutions, says that a Commodity Trading Advisor used to be satisfied with being known as a portfolio manager trading commodities and futures in a managed fund. There is no question today's investor has become more sophisticated. As a result, the selection of investment options has grown more complex. This makes it even more important for CTAs to be familiar with the management and use of these products.
What is the exact role of a commodity trading advisor today? Trading derivatives for a managed fund of futures continues to be important. CTAs are also more involved in 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. Hedging is a proven way to reduce volatility. The largest institutions have known this for years, but now it's available to smaller companies and individual investors. As products continue to develop, the CTA will also evolve to meet the needs of today's professional 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. SWAPS 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. Understanding the industry from a different perspective is essential to understanding the changing investment climate. The analysis is now the catalyst for adding a value-added service to retain clients. 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.