Before committing capital to any investment strategy, understanding what the academic record actually says is a reasonable starting point. The managed futures category, which encompasses the systematic trend following approach at the core of this site, has been the subject of serious institutional research since the 1990s. The papers collected here represent that body of work: peer-reviewed studies and working papers from researchers at Ohio State, Syracuse, the University of Massachusetts, Duke, and Oklahoma State, covering performance persistence, survivorship bias, return estimation, and the role of CTAs in portfolio risk management. The research is old in calendar terms and durable in what it found.
For context on what managed futures actually means as a category, and why the label is imprecise, see the main managed futures page. The short version: the term describes a regulatory wrapper, not a strategy. The strategy most of these papers are actually studying is trend following.
What Managed Futures Means
Several definitions have been used in institutional contexts, and each captures a different facet of the same category. Taken together they describe the structural reality of how these managers operate:
Public funds, private pools, managed accounts, and other investment entities which invest on a long and short basis almost exclusively in exchange traded commodity derivatives and financial derivatives, including futures, options, and warrants. More broadly, managed futures is an investment for the purpose of speculating in futures and options markets, where a professional trading advisor is employed to manage the trading. The term also refers to professionally managed investments in commodity and financial futures markets, and represents an industry comprised of professional money managers known as commodity trading advisors, or CTAs, who manage client assets on a discretionary basis using global futures markets as an investment medium.
The relevant academic question has always been whether these managers deliver returns that justify their fees and that are genuinely uncorrelated with traditional asset classes. The papers below addressed exactly that question through the mid-to-late 1990s, when the category was first attracting serious institutional attention.
Research Papers and White Papers
Trend Following: Performance, Risk and Correlation Characteristics
by Graham Capital (Ken Tropin).
Download PDF
Managed Futures: A Real Alternative
Download PDF
Managed Futures Trading and Futures Price Volatility
by Scott Irwin and Satoko Yoshimaru, Ohio State University, completed in May 1996.
Download Word Report | Download Excel Charts
How Do CTAs’ Return Characteristics Affect Their Likelihood of Survival?
by Fernando Diz, Syracuse University, completed in November 1996.
Download PDF
Managed Futures, Hedge Fund and Mutual Fund Return Estimation: A Multi-Factor Approach
by Thomas Schneeweis and Richard Spurgin, University of Massachusetts, completed in May 1997.
Download Word Report | Download Tables
Performance Persistence for Managed Futures
by B. Wade Brorsen, Oklahoma State University, completed in September 1997 and updated April 1998.
Download Word Summary | Download Word Report
Survivorship Bias and Investment Style in the Returns of CTAs: The Information Content of Performance Track Records
by David A. Hsieh with William Fung, Journal of Portfolio Management, 24 (1997), 30-41.
Download PDF
Informational Content in Historical CTA Performance
by Thomas Schneeweis, Richard Spurgin, D. McCarthy, Journal of Futures Markets (May, 1997).
Download PDF
Comparisons of Commodity and Managed Futures Benchmark Indices
by Thomas Schneeweis, Richard Spurgin, Journal of Derivatives (Summer, 1997).
Download PDF
Return Interval Selection and CTA Performance Analysis
by D. McCarthy, G. Martin, Derivatives Quarterly (Summer, 1997).
Download PDF
Multi-Factor Models in CTA/Hedge Fund Return Estimation
by T. Schneeweis, R. Spurgin, Working Paper, CISDM/SOM, University of Massachusetts, 1996.
Download PDF
Managed Futures and Hedge Fund Investment for Downside Equity Risk Management
by Thomas Schneeweis, Richard Spurgin, M. Potter, Derivatives Quarterly, Vol. 3, No. 1 (Fall, 1996).
Download PDF
What the Research Shows
Several themes run through this body of work. First, managed futures returns have historically exhibited low correlation with traditional equity and bond markets, making the category genuinely useful as a portfolio diversifier rather than simply a source of additional beta. Second, survivorship bias is a real concern in evaluating CTA track records, as weaker managers exit and leave only stronger records in the historical database. The Hsieh and Fung paper addresses this directly and remains one of the more careful treatments of the problem. Third, performance persistence, the question of whether past CTA returns predict future ones, is more complex than simple extrapolation suggests. The Brorsen paper from Oklahoma State is worth reading for its nuanced treatment of this question.
The Ken Tropin paper from Graham Capital covers performance, risk, and correlation characteristics specific to trend following as a style within the managed futures universe. It is the most directly relevant to understanding why the approach has attracted institutional capital over decades and how it behaves relative to other return streams. The full discussion of trend following as a strategy, including its relationship to drawdown and momentum, is covered across the concept pages on this site.
The managed futures industry and the hedge fund world overlap in ways that confuse even experienced investors. Both categories can contain trend following strategies. Both use derivatives. Both charge performance fees. But the structural differences matter, and so does the distinction between discretionary and systematic approaches. This page collects the core research on managed futures, CTAs, and their relationship to trend following as a systematic strategy.
Defining the Category
Managed futures covers public funds, private pools, managed accounts, and other investment entities that invest on a long and short basis almost exclusively in exchange traded commodity derivatives and financial derivatives, including futures, options, and warrants. More broadly, it refers to professionally managed investments in commodity and financial futures markets, where a professional trading advisor is employed to direct the trading. The term also describes an industry of professional money managers known as commodity trading advisors, or CTAs, who manage client assets on a discretionary basis using global futures markets as their investment medium.
Where managed futures and hedge funds intersect is in the use of leverage and the ability to go both long and short. Where they diverge is in regulatory oversight, instrument focus, and, critically, in strategy. A trend following CTA operates with defined rules, systematic entries and exits, and no reliance on fundamental analysis or discretionary judgment. A discretionary macro hedge fund may use futures too, but the decision-making process is entirely different. Conflating the two leads to poor allocation decisions.
Trend Following Within the Managed Futures Universe
The research above covers the managed futures category broadly. Within that category, trend following has been the dominant performance driver over time. The systematic nature of the approach, its defined entry and exit rules, its use of risk parameters set before any trade is placed, and its indifference to fundamental forecasts, separates it from most other strategies operating under the managed futures umbrella. The Turtle experiment remains the most famous demonstration that these rules could be taught and applied by people with no prior trading experience.
Understanding drawdown is essential to evaluating any managed futures manager. The return profile of trend following is inherently lumpy: long periods of flat or negative performance punctuated by shorter periods of strong gains during sustained market trends. Investors who cannot tolerate the flat periods will not be in the strategy when the gains arrive. This is the central behavioral challenge the research does not fully capture, but which every practitioner in the space confronts.
Frequently Asked Questions
Are these research papers still relevant today?
The core findings on correlation, diversification benefits, and survivorship bias have held up well. The specific performance numbers reflect their era, but the structural arguments about why managed futures offer diversification relative to equities and bonds remain valid. The strategy has been through multiple market cycles since these papers were written, and the basic properties they identified have been confirmed repeatedly.
What is survivorship bias and why does it matter for CTA research?
Survivorship bias occurs when databases only include managers who are still operating, which means failed or closed funds are excluded from the historical record. This makes average past performance look better than it actually was. The Hsieh and Fung paper identified this as a material distortion in CTA performance analysis and provided methodology for adjusting for it.
What is the difference between a CTA and a hedge fund?
A commodity trading advisor is a specific regulatory designation from the CFTC covering managers who trade futures and options on behalf of clients. Hedge funds are a broader and less precisely defined category that can include a wide range of strategies and instruments. Many trend following managers operate as CTAs; some also operate under hedge fund structures. The regulatory wrapper differs; the underlying strategy may be the same.
How does a managed futures account differ from a hedge fund?
Managed futures accounts are regulated by the CFTC and operated by registered CTAs. Hedge funds typically operate under different regulatory frameworks and may use a broader range of instruments and strategies. Both can employ trend following, but the regulatory oversight, fee structures, and reporting requirements differ. For individual investors, the practical difference often comes down to minimum investment size and liquidity terms.
Why do managed futures and equities tend to be uncorrelated?
Because trend following profits from sustained directional moves across a diversified set of markets, including those that move inversely to equities during stress periods, such as government bonds, certain currencies, and commodity markets. The strategy does not take a view on whether equities will rise or fall. It simply follows whatever trend is present in whatever market it trades. This structural indifference to direction is what produces the low correlation to equity returns over time.
What is the significance of the Schneeweis and Spurgin research?
Thomas Schneeweis and Richard Spurgin produced several of the foundational academic papers on CTA and managed futures performance in the 1990s. Their multi-factor approach to return estimation, their work on benchmark comparisons, and their research on informational content in historical CTA performance all contributed to the institutional legitimacy of the category. Their findings consistently supported the diversification case for including managed futures alongside traditional assets.
TurtleTrader is Michael Covel’s site. So is TrendFollowing.com.
That’s where you’ll find his trading systems, courses, 1,400+ podcast episodes and much more.