Transcripts

Where Managed Future Funds Are Finding Fortunes

SUSIE GHARIB: It's been a disappointing year for many stock mutual funds. But the opposite is true for managed futures funds. Many are actually making money. These funds invest in everything from currencies to commodities. And as Diane Eastabrook reports, they're cashing in on consistency.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: So far, it's been one of the most profitable years ever for futures funds. Managed futures funds pool investor dollars, then buy futures contracts on stock indices, treasuries, currencies and commodities. Through the end of September the Index that tracks managed futures was up nearly 15 percent compared to the S&P 500, which was down more than 28 percent.

SOL WAKSMAN, PRESIDENT, BARCLAY TRADING: Most of the returns of managed futures have been driven by the financial markets rather than things like pork bellies or the grain markets, for example.

DENNIS NEWTON, SENIOR VICE PRESIDENT, MILBURN RIDGEFIELD CORP.: Here's the dollar dropping against, you know, most currencies.

EASTABROOK: Fund manager Dennis Newton says consistent trends, particularly in the Treasury and currency markets, have helped boost returns over the past several months. Newton uses mathematical models to determine market direction and he thinks some trends will continue for the near term.

NEWTON: I'd say at the present time we're still very much long global treasuries, on balance. And the currency markets, I'd say the dollar's weakness has abated in some areas, you know, for a while. The Japanese yen seems to be weakening again against the dollar. So that trend is less clear cut at this time.

EASTABROOK: Fund managers are also tracking potential trends in other commodities. Oil prices could spike if there is a war in Iraq. Grain prices have also been rising recently because of this summer's draught in the Midwest. Industry watchers say the strong performance futures funds have enjoyed this year could attract more investors. But experts say the speculative nature of futures makes these funds better suited for long-term investors.

WAKSMAN: It's not something that you would look to invest in for two or three months. But rather you need to look at, I would say, a three or five year minimum.

EASTABROOK: Industry watchers caution that managed futures funds can be volatile, so they should account for no more than 10 percent of the average investor's overall portfolio. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.