The word survival sounds desperate, but nevertheless is particularly important when selecting a managed futures fund to invest in. Many managed futures funds do not survive and as a result, dissolve. Consequently, investors lose part or all of the investment. When looking at the track record of a managed futures fund manager it is important to look at following evaluation factors to determine if the fund being researched will survive.

Factors that appear to be related to a fund’s probability of survival include:

• Sharpe ratio (the higher the better)

• Maximum monthly return (positive impact)

• Average monthly positive return (this tends to be substantially lower for non-surviving funds in the twelve months preceding dissolution).

• Maximum monthly drawdown (negative impact)

• Standard deviation of monthly returns (negative impact)

• Number of months taken to recover from a drawdown – in absolute terms as well as a percentage of the trading program’s life (the longer the time, the less likely the trading program is to survive).

• Whether the trading program is "systematic" or not (systematic traders have a higher probability of survival)

• Assets under management (a large asset base would have a higher net present value of future fees than a small amount of assets)

Information Source: Lehman Brothers