It was Dr John Lintner of Harvard University who famously
documentedthe diversification properties of managed futures in
his landmarkstudy, "The Potential Role of Managed Futures
Accounts in Portfolios ofStocks and Bonds", published in 1983.
"The combined portfolios ofstocks (or stocks and bonds) after
including judicious investments[...] in leveraged managed
futures accounts show substantially lessrisk at every possible
level of expected return than portfolios ofstocks (or stocks
and bonds) alone," he wrote.
If that was something that most institutions thought
theyunderstood, last year’s turmoil came as a
profoundly unsettlingsurprise. That is because the principal
shock of 2008 was not, perhaps,how poorly some hedge fund
strategies performed, but how closelycorrelated their returns
were with other asset classes that theirclients were aiming to
diversify away from.
"If you look at the evolution of the alternative
investmentmanagement sector over the past five years, a whole
new range of exoticstrategies has been created,...