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Expected v. Realized Returns in Managed Futures

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Clarke Expected v. Realized RoROur weekly newsletter is up here, analyzing how expectations impact the investing experience and decission making paradigm. Confused? Think about it this way: for those who first set sight on the Mona Lisa or ate at the best restaurant in town and felt underwhelmed, asking yourself what the big deal is; or conversely have been anything but excited to see a movie you didn’t pick; yet were pleasantly surprised after the fact – you have suffered from misaligned expectations and results.

Most of us go through some form of mismatched results and expectations nearly every day in our lives, such as running late, landing early, a huge repair bill or the like; and think little of it.  But In investing, and particularly in alternative investments – this expectation/reality differential can cause big problems for an investor who otherwise has little in the way of benchmarks or other investments to compare their performance to.

Without the crutch of a ‘market’ to fall back on, most investors in alternative investments such as managed futures somehow tend to feel losses more than their stock and bond counterparts, who have the comfort of falling back on the old defense of being down with all other investors.

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