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What is a Managed Futures Account?

By Luke Arthur
Updated May 17, 2024
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A managed futures account is a popular type of investment designed to create a way for experienced investors to get involved with the futures market. This type of investment has been known to provide superior returns to traditional forms of investment. A managed futures account has professional management, utilizes several different types of investments, and carries with it some high risk.

A managed futures account is much like a mutual fund except that it invests in different types of securities. With a managed futures account, investors are going to be able to benefit from professional management. The account manager is going to be an expert in many different financial matters and will be in charge of making the investment decisions on behalf of the group. Investors are going to pool their money together and the account manager is going to handle everything for them.

This type of arrangement allows experienced investors to get involved in more complex markets. While most investors feel comfortable navigating the stock market or bonds, they may not feel comfortable getting into more intricate investments such as a futures contract. The managed futures account allows a professional to handle the details for an inexperienced investor. Regular investors can leverage the experience of these professionals and benefit from it.

The managed futures account uses the money of the group to invest in different types of investments. The most common type of investment is a futures contract. In addition to futures contracts, these accounts can invest in futures options, which give them the right to purchase a futures contract but not the obligation to do so. Some of these managed accounts will also invest in certain government securities to provide some stability to the investment.

Even though this investment carries with it some potential for returns, there are some risks associated with it. Anytime an investor chooses to get involved in the futures market, there is some potential for loss. Investing in commodities and futures is extremely speculative.

Although the managers of these accounts are highly skilled and have a lot of experience in commodities and futures, many unexpected things could occur. The value of commodities can swing wildly from one day to the next. Investors need to be aware that there is the potential for them to lose the money they have invested into the managed account. This type of investment requires a high tolerance for risk.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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