The Role Of A CTA, Commodity Trading Advisor
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
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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 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
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.