The term managed futures describes an industry made up of professional money managers known as commodity trading advisors (CTAs). These trading advisors manage client assets on a discretionary basis using global futures markets as an investment medium. Trading advisors take positions based on expected profit potential.

Investors interested in managed futures can invest with a CTA or a Commodity Pool Operator (CPO). A CPO is a Limited Partnership in which the funds invested are allocated to one or more CTAs. CTAs and CPOs are required by the CFTC to provide a Disclosure Document to all potential investors. A Disclosure Document includes the background and experience of the CTAs, CPOs and their principals, track records of past performance, a description of the trading strategy, markets traded and risk control measures, as well as fees and compensation. CTAs and CPOs must report their actual performance records for the previous three years. If a CTA has no past performance or is using a hypothetical performance, this fact also must be disclosed.

Most alternative investments such as futures and options on futures can be traded in both rising and falling markets. Because there is no prohibition against short sales in futures and forward markets, it is just as easy to establish a short position with the objective of profiting from declining prices as it is to establish a long position with the objective of profiting from rising prices. It is this potential to make money, regardless of market direction, that makes managed futures particularly attractive to sophisticated investors. Of course, if prices go higher while an investor has a short position, he or she will lose money until the short position is exited and vice versa.