The professionals within this industry have their own trade association, the Managed Futures Association. Its function is to assist members, to promote the industry, and to advance the industry. They produce an excellent monthly professional journal that discusses issues important to members, everything from legislation, regulatory compliance, trade execution, to marketing. Their annual membership directory is an excellent source to find CTAs and CPOs.

Commodity pool operators are the individuals or corporations who structure funds. These are pools of commingled money from a number of individual investors. Most of the funds are large enough to require multiple CTAs. If the funds are properly selected, this further reduces risk, as we saw earlier. Most CPOs closely follow the performance of a large number of CTAs and analyze their performance. For this reason, CPOs can be excellent consultants in CTA selection.

Besides the MFA Membership Directory, there are other industry directories available. Futures Magazine publishes an annual reference guide, which includes a section on CTAs and CPOs.

The NFA will provide, for a nominal fee, the names, addresses, _and telephone numbers of all registrants by category, i.e., CTAs, CFOs, IBs, FCMs, etc. The only problem with the CTA list is you _can’t tell which ones are active. Someone could be registered as a CTA, but not actually trading. Christopher Resources Inc. puts out a _similar list on computer diskette. This makes it easy to update and/or import into a database for future reference.

Speaking of databases, there are several available. Here’s a list of the leading ones:

• Barclay Trading Group
• LaPorte Asset Allocation
• Prudential Securities Incorporated
• TASS Management Ltd.

Several of these databases include analytical software, allowing the license holder to run the numbers to his or her heart’s content. Most offer a monthly update of each CTA’s statistics. Some, like Prudential’s, are proprietary and available only through their brokers or correspondent brokers. Barclay provides a quarterly hard copy update to subscribers.

Several of these database services, LaPorte for example, include the phrase “asset allocation.” This means they consult with clients to blend managed futures programs with an investor’s or institution’s overall portfolio. Barclay Trading Group is another firm that consults in this area.

Other fertile areas to search for emerging CTAs are trade shows and trading contests. Some commodity firms attend what are generally called money shows, which are retail exhibitions covering a wide variety of investments. Twice a year the MAR conducts a conference on futures money management. At this meeting, you can find quite a few CTAs. Since this is an industry-type trade show, the CTAs are primarily interested in getting the attention of FCMs who have large numbers of brokers who can promote their program (if they can get on the FCM’s approval list). The topics discussed are also of more interest to someone in the industry than to an investor. Nevertheless, it is a place to get exposure to CTAs.

What Suits Your Needs

Who are you? What are you looking for? What are your needs? H_owmuch can you invest? These questions must be answered in order to sort out the various sources for CTAs.

The best approach is to use some examples. If you are a small investor with $5,000 or so of risk capital to invest, consider a fund, pool, or limited partnership. We’ll be talking about these in more detail, but the primary reasons to choose these are predefined and limited risk, plus it’s the only way to get adequate diversification of CTAs and markets with $5,000.

The term “risk capital” is critical. It refers to money an investor has available to use to speculate. Another description is money that, if lost, will not alter the investor’s lifestyle.

Only risk capital should be used for highly speculative investments, such as raw land, gas and oil exploration, and futures. The high risk is balanced by the potential for high return.

The investor with a solid portfolio of stocks, bonds, real estate, insurance, a retirement plan and $25,000 to $100,000 of risk capital has different needs. The objective for this person might be to boost the return of the overall portfolio by obtaining high returns from futures. A successful investment in futures can lift the normally modest return generated by the cash and/or bond portions of the portfolio. An additional benefit, as we saw when we analyzed the correlation of futures to stocks, is reduced volatility.

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