Commodity Trading Advisors (CTAs): What is their role?

Today's Commodity Trading Advisor is no longer to be thought of only as a Portfolio Manager. www.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.


So what exactly is the role of today's Commodity Trading Advisor. Trading derivatives for a managed fund of futures continues to be important. 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.


In order to preserve asset growth, it is crucial to use derivative analytics in order manage adverse risks of an equity or bonds portfolio caused by adverse market conditions. 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. No doubt as products continue to evolve so too will the CTA evolve to meet the need of today's professional money manager.


Derivatives are not limited to commodities exchange traded futures and options. There continues to be an ever expanding list of over-the-counter derivative products. These are SWAPS. SWAPS are privately traded products that are not transacted through a recognized exchange. The difficulty is the buyer and seller must find each other to undertake such an arrangement, not always easy. Second, there 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.


The role of a commodity trading advisor is not limited to just 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. Structured products, risk management, and OTC derivatives are all included. Continuing education has been and continues to be the hallmark of the best in the industry.