Investment strategies created by RL are meant to be full service, fee-based products where clients retain full control of their assets, whether they are individuals or institutions.

RL Capital’s philosophy for developing investment strategies is based on applying time-tested principles to an advanced research process. In our view, long-term investment success is predicated on a strict focus on risk management within a rigorously tested and well-researched plan. Our quantitative, price-based investment models are built on these principles providing, in our opinion, the largest opportunity to compound gains and avoid large losses over long periods. These core principals are outlined further below:

Risk management is considered by RL Capital to be absolutely critical to successful investing and is the core component of our investment philosophy. We understand the importance of money management believing that superior results are a function of proper, disciplined techniques. All of our investment strategies contain the following characteristics.

• Systematic - eliminate emotion from the investment process; always have a plan

• Trend – never fight the predominant market direction; things in motion tend to stay in motion; opposing the market brings significant additional risk

• Diversification – constructing portfolios with a broad range of non-correlated assets

• Discipline – Unwavering execution of tested investment process if outright automation is impractical

All RL strategies emphasize maximizing the ratio of return to risk. These core principles give us the best chance to yield a return for our clients while minimizing two of the most detrimental aspects of investing – volatility and drawdowns. Volatility has many practical and statistical definitions, but we choose to think of it as the degree and frequency to which a client’s portfolio will swing, either up or down over a given period of time. For example, an account where daily changes of plus or minus 3 percent are common would be said to be more volatile than an account typically seeing changes of only 1-2 percent daily. Drawdown is related to volatility but different. It is a measure of how far an account has fallen from its previous all time high level, adjusting for things like withdrawals and contributions to the account. Drawdown is one of the simplest ways to measure how much money a client has lost over a period of negative performance and synonymous with the amount of anxiety a client might feel about his/her investment plan. Accounts experiencing more volatility will be more likely to have greater drawdowns.

The RL Capital research process begins with setting aside personal biases or feelings about the market and using proven statistical techniques to test various ideas about market behavior. Any new concepts put through our testing process are done so keeping in mind certain, unchanging fundamentals mentioned previously, namely systematic risk management incorporating diversification and rigid discipline in the implementation process.

Specifically, new ideas are tested for both worst and best case scenarios to ensure reliable outcomes for a range of market conditions over a long period of time. For example, a system can be built that would exploit any one set of markets or market conditions wonderfully, but may fail at providing a consistent return or at protecting capital during a different set of conditions. While our individual systems are not built to make money in every market timeframe as we believe this is unreasonable and impractical, they are designed to take advantage of a certain range of conditions while preserving capital in others.

RL Capital maintains an unwavering commitment to customer service. We feel uniquely positioned by offering clients real-time access to our managers and traders, ad-hoc data analysis and relevant marketing materials. We treat every client as a partner and place a premium on honest, transparent communication at all levels of our firm.

For additional information regarding existing programs or products please call us at (800) 765-6936.

Trading futures and options involves substantial risk of loss no matter who is managing your money and is not suitable for all investors.

Past performance is not indicative of future results.

Q. What are Managed Futures?
A. Managed futures as a generalized term describes an industry comprised of professional money managers who use the global futures and options markets as an investment medium. These managers are discretionary, meaning they make decisions to purchase or sell particular managed futures investments on the clients' behalf, via a revocable power of attorney.

Q. What are Commodity Trading Advisors?
A. Commodity Trading Advisors, also known as CTAs, are a type of professional trader dealing with managed futures investments. CTAs trading managed futures are typically registered with the National Futures Association, or NFA, and give advice regarding the buying and selling of futures or options contracts.
 

Q. Are professionally managed futures for everyone?
A. No, they are not. We would first provide you with all the necessary information to make sure you understand both the risks and rewards of this type of investing. Generally, in addition to having the required risk capital, an investor needs to have realistic expectations about returns on investment, tolerance to temporary drawdowns that inevitably will occur, and acceptance of the reality that the risk of loss always exists.

Q. Are There Special Risks Associated with Managed Futures?

A. Yes. Investing in managed futures carries certain specific risks of which every managed futures investor should be aware. In particular, it is important to understand that the high degree of leverage often obtainable with managed futures investing, can work both for and against a managed futures investor. The use of leverage can lead to large losses as well as gains in managed futures investing. In some cases, managed futures accounts are also subject to substantial charges for management and advisory fees. There are many other risks to consider with managed futures and with trading in the commodity markets. Investors should carefully study the disclosure document of the CTA before making any investment in a managed futures product.

Q. Are managed futures a good short term investment?
A. Because futures markets tend to be cyclical, we recommend that investors hold a managed account, commodity pool or futures fund investment for at least three to five years and treat managed futures as a “core” investment instead of as a short term trading opportunity.

Q. Will adding managed futures diversify my portfolio?
A. It is impossible to answer this question because portfolio holdings and investment objectives vary from one customer to another. Modern Portfolio Theory suggests that a portfolio containing low correlated, positive performing investments usually produces better risk-adjusted returns than any of the portfolios underlying individual investments. Research indicates that managed futures have been negatively correlated to traditional portfolios of stocks and bonds when they experience prolonged losses, and positively correlated when they experience sustained gains. If that’s true, adding managed futures to a traditional portfolio of stocks and bonds should reduce overall volatility while improving overall returns.

Q. Can IRAs and other self directed plans invest in managed accounts, commodity pools and futures funds?
A. Yes, but an investor must ensure that his/her plan permits such investments. If the investor’s plan custodian does not accept alternative investments, he/she will have to open an account with another custodian that does. Two plan custodians specializing in handling alternative assets are:
 

For informational purposes only and should not be construed as an endorsement.

Q. Why does the general public say that futures trading is very risky?
A. Many people feel that futures trading is risky primarily because of the amount of leverage available to futures traders. For example, it only takes $4,000 in initial margins to trade a contract worth approximately $50,000 of the mini S&P 500, so the leverage available is 12:1. Because many investors who trade for themselves or use the services of a broker do not know how to take advantage of the leverage available or manage their risk exposure, they tend to lose money. That is why it makes sense to delegate responsibility for trading futures and forex to a registered CTA who follows the markets on a full-time basis and knows how to use leverage appropriately as part of an overall strategy for trading these markets.

In addition, statistics show that 85% of people who trade futures for themselves lose money. This statisitic underscores why many individuals wanting to participate in futures trading are turning to professional trading advisors, such as RL Capital, in unprecedented numbers. For example, according to the CME, assets under management in the managed futures industry has grown by nearly 700% in the past 10 years!

Q. How are gains and losses on futures trades taxed?
A. You should consult your tax advisor or preparer to determine how your gains and losses will be taxed. If you trade for yourself or have managed futures accounts, be sure you have all Forms 1099 provided by your FCM reporting trading profits/losses on Section 1256 contracts and interest or T-Bill discounts earned available when you prepare your tax return or meet with your tax advisor. If you invested in a pool or fund the CPO will send you a Form K-1 showing your share of profits/losses and other income that should be reported to the IRS. As a general rule open positions will be marked-to-market as if the unrealized gains and losses were realized on the last day of the calendar year for individual accounts and the last day of the tax year for pools and funds. Marked-to-market unrealized gains/losses and realized gains/losses on 1256 contracts will be taxed on a 60%/40% basis as if 60% of the gains/losses are long term gains or losses and 40% are short term gains or losses.

Q. What are “Section 1256” contracts?
A. Because some futures interests like single stock futures contracts, narrow based indices and inter-bank foreign exchange contracts do not qualify for Section 1256 treatment and are taxed like securities.
 
Q. How much money should I invest in a Managed Futures Account?
A. Only risk capital should be used in managed futures or any speculative investment. Risk capital is defined as capital that you do not want to lose, but if you did, your lifestyle would not be affected. Professional money managers often suggest a portfolio allocation of anywhere between 5% and 25% managed futures, depending on an individual clients investment goals.

Q. How do I find out more?
A. To request additional information, or to discuss managed futures as an investment alternative, please Contact Us or call us: 1-800-765-6936

This is not an offer to sell or a solicitation of any offer to purchase managed futures. The above is the opinion of RL Capital and is provided for informational purposes and should not be construed as investment advice.

This FAQ does not contain all the information necessary to make an investment decision. You should refer to the RL Capital Managed Account Program Disclosure Document if you are considering investing in managed accounts or the offering memorandum for commodity pools or futures funds.

RL CAPITAL

The development of regulated futures exchanges across the globe allows RL Capital to diversify its portfolios by sector, geographic market, as well as product. By broadly diversifying across global markets, RL Capital is positioned to potentially profit from price changes in stock, bond, currency and money markets, as well as from diverse commodity markets having virtually no correlation to traditional asset classes.

Portfolio selection is of vital importance within each system designed by RL Capital with a great deal of research and testing put into finding the optimal balance of non-correlated markets and sectors. Currently the RL Capital Managed Account program contains over 30 exchange traded futures markets across 8 sectors.

At this time, RL Capital’s portfolio consists of the following markets/sectors.

MANAGED FUTURES

Together with the diversification benefits of the individual portfolio, managed futures has historically provided portfolio diversification.. The main benefit of adding managed futures to a traditional portfolio of stocks and bonds is the potential to decrease portfolio volatility. Risk reduction is possible because managed futures can trade across a wide range of global markets that have virtually no long-term correlation to most traditional asset classes. Moreover, managed futures investments generally perform well during adverse economic or market conditions for stocks and bonds, thereby providing excellent downside protection in most portfolios.

1) Managed futures: CASAM CISDM CTA Equal Weighted;
2) Stocks: MSCI World;
3) Bonds: JP Morgan Government Bond Global;
*Courtesy CME Group: Managed Futures: Portfolio Diversification Opportunities.

The graphic above illustrates that while managed futures can decrease portfolio risk, they can also simultaneously enhance overall portfolio performance. The data illustrate that adding managed futures to a traditional portfolio improves overall investment quality while also potentially reducing risk. Even portfolios with a 20% allocation to Managed Futures experience reduced volatility as well as higher returns over the long-run.

Trading futures and options involves substantial risk of loss no matter who is managing your money and is not suitable for all investors.

Past performance is not indicative of future results.