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Sergio Curry
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Managed futures funds offer an alternative to investors seeking to add holdings to their portfolio beyond stocks or traditional mutual funds. Rather than being managed by the fund owner, these funds are managed by commodity trading advisors, who are essentially public money managers required to register with the Commodity Futures Trading Commission.
Futures funds offer investors an opportunity to achieve diversification in their portfolios through investments in foreign currencies, precious metals, grains and interest-rate swaps, as well as bond futures and equities indexes. In short, managed futures funds aren’t your typical mutual fund. If you’re an investor who’s contemplating managed futures, there’s one very important factor to consider first: cost.

Managed Futures Funds: Watch for Hidden Fees
According to BarclayHedge, the managed-futures industry held $342.3 billion in assets under management through the third quarter of 2016. The potential for less risk and higher returns associated with these funds has spurred their popularity. In a December 2016 survey 41% of financial advisors said they planned to increase allocations of managed futures funds in their client accounts in 2017.
While the diversification that managed futures funds offer is appealing, it may come at a high cost. In some instances managed futures funds may not fully disclose all the fees they charge to investors. The result is that investors end up parting with a higher proportion of their returns than they may have anticipated. (For more, see 9 Misconceptions About Managed Futures.)
In January 2016, for example, the U.S. Securities and Exchange Commission determined that Equinox Fund Management LLC overcharged investors and failed to disclose its valuation method for certain holdings in one of its managed futures funds, the Frontier Fund. Equinox agreed to refund $5.4 million to investors in excessive management fees, in addition to paying a $400,000 penalty.
A recent Wall Street Journal report sheds further light on pricing within managed futures funds, citing the Equinox Campbell Strategy Fund as an example. That fund, which had approximately $738 million in assets at the end of December 2016, invests in both futures contracts and total-return swaps. This is a vehicle that allows banks to transfer market and credit risk of an underlying asset to leverage greater returns.
What investors may not realize is that the portfolio manager of a managed futures fund may deduct fees from those total-return swaps. For example, the Equinox Campbell Strategy Fund reportedly paid 0.35% of its assets to cover bank fees for its total-return swaps in 2015. At the same time it paid 1% of total fund assets and 20% of trading profits to Campbell & Co. of Baltimore, the fund’s portfolio manager.
In its December 2016 prospectus the net expense ratio for Class A shares was reported as 1.15%. That doesn’t seem unusually excessive in comparison with other actively managed funds, but the problem is that that figure doesn’t include the additional swap expenses. Those costs are instead subtracted from gross returns. The fund’s prospectus specifies that investors may pay an additional 1.35% in combined management and performance fees, but if you’re not reading the fine print, it may be easy to miss.
While the disclosures that managed futures funds provide are sufficient to be in compliance with SEC regulations, there may be a weak link in the chain if an investor is relying on a financial advisor to help steer investment decisions. That could lead to a nasty surprise if you’re investing in managed futures funds with the expectation of higher returns, only to have your investment performance diminished by fees. (For more, see 8 Investing Fees That You Should Never Pay.)

The Bottom Line
Before buying in to managed futures funds, be sure you have a thorough understanding of what you’re investing in – and what you’re going to pay for that investment. If you’re purchasing managed-futures-funds shares through a brokerage or registered investment advisor, ask for a clear explanation of the fee schedule up front. Specifically, find out whether the fund invests in total-return swaps and, if so, what the associated fees are. The more you know beforehand, the easier it will be to gauge how much of a return you can anticipate on your investment.

Since you graduated, you've probably developed skills beyond what you learned in college. Therefore, you may not have to go back to college if you want or need to change careers. In fact, if you're looking to make a career move, you might be more successful if you look more broadly at your set of skills and learn how to sell those to employers outside of your current career and education niche.
Focus Your Career Goals
Do you already know what you want your next career move to be? If so, you can jump ahead to the section on creating a skills-based resume. If you don't, you have several options.
First, make a list of what you are looking for in a new career. For instance, are you thinking about changing jobs because you no longer want to sit in a cubicle for eight hours a day? Then your list should include something like "must involve being away from my desk at least four hours per day." Similarly, you may want to have a job that doesn't require a lot of overtime. Consider your preferences for required travel or working on projects in teams or independently. You may not get everything you want, but brainstorming is a great start.
Next, conduct research using descriptions of what you are looking for in a career. Ignore jobs you know are outside of your field of interest. For instance, if somehow "lion tamer" comes up in your search – and your friend's cat makes you nervous – you should eliminate it from any further discussion.
Based on your search results, narrow research to careers that fit at least five out of 10 things you want in a new career. Pick five careers for building a skills-based resume.
University career centers can help you with the following:
• Career tests to help you find what you might like to do next
• Job placement
• Resume review and workshops
Volunteering
Still not sure what your next move should be or need guidance in defining your career goals? Volunteer for a charity organization and/or call the career center at your old university for help. Remember to bring the list of what you are looking for in a new career position with you.
Volunteers at nonprofit organizations are often given as much responsibility as they want to have and extra guidance because they are working for free. You could learn leadership and training skills while showing newer volunteers the ropes or marketing and sales skills while helping to promote charity events. Let volunteer coordinators know what your skills are, so they can assign tasks to help you move forward.
Create a Skills-Based Resume
Step 1: List all jobs you've held.
Jot down at least five tasks you performed in each job. For instance, working in teams to create ad campaigns, helping customers find the right products within your company's product line, making travel arrangements for industry conventions or negotiating prices with suppliers.
Then, under each task, write down how you completed this task. Not only will you see one-word skills such as "organizing" or "problem solving," but you'll also find the expanded details you need for adding specifics to your resume. You will not copy your job listings into your resume, but this exercise will be the basis for step three.
Step 2: Browse career sites for your skills.
Select the new career fields in which you are interested. Then, enter descriptions of your skills one at a time into the search box.This will help you determine the specific position titles that could work with the skills you have. Pick five job listings to mull over and study the full descriptions.
Step 3: Showcase skills that fit descriptions of your desired positions.
Pick two skills you possess that match the job listings you selected. Create separate skills sections for your resume for each position. For instance, a resume for an event planning position could list travel planning and problem solving as skills. Skills you could use for a merchandising manager position might include organization, negotiation and/or market analysis.
After picking two of your skills per job, add five to 10 bullets under each skill with your accomplishments in this area. The bullets should be similar to the bullets in step two, but your accomplishment listings will be more detailed.
Step 4: Format your resume.
• Put your name, address, and contact information at the top.
• Objective – Limit your objective to one sentence that specifies an objective directed at the specific position to which you are applying. Don't write that you are looking for new experiences in a creative field. Specify what you want to do for that company.
• Have a section for education below your skills. You want your skills to stand out more than your degree.
• Summary of your experience. List all your post-college jobs, your dates of employment and the city and state. If you have a lengthy career history, limit your previous jobs section to where you developed the skills in your resume. Volunteer positions can be included.
• Limit your entire resume to one page
The Bottom Line
Most people will change careers at least once in their lives; some will change occupations multiple times. If you went back to school each time, you'd take on a new professional title: lifetime student. Use your professional skills to catapult you into a new career field instead.

The internal rate of return (IRR) is frequently used by corporations to compare and decide between capital projects, but it can also help you evaluate certain financial events in your own life, like lotteries and investments.
The IRR is the interest rate (also known as the discount rate) that will bring a series of cash flows (positive and negative) to a net present value (NPV) of zero (or to the current value of cash invested). Using IRR to obtain net present value is known as the discounted cash flow method of financial analysis. Read on to learn more about how this method is used.
IRR Uses
As we mentioned above, one of the uses of IRR is by corporations that wish to compare capital projects. For example, a corporation will evaluate an investment in a new plant versus an extension of an existing plant based on the IRR of each project. In such a case, each new capital project must produce an IRR that is higher than the company's cost of capital. Once this hurdle is surpassed, the project with the highest IRR would be the wiser investment, all other things being equal (including risk).
IRR is also useful for corporations in evaluating stock buyback programs. Clearly, if a company allocates a substantial amount to a stock buyback, the analysis must show that the company's own stock is a better investment (has a higher IRR) than any other use of the funds for other capital projects, or than any acquisition candidate at current market prices.
Calculation Complexities
The IRR formula can be very complex depending on the timing and variances in cash flow amounts. Without a computer or financial calculator, IRR can only be computed by trial and error. One of the disadvantages of using IRR is that all cash flows are assumed to be reinvested at the same discount rate, although in the real world these rates will fluctuate, particularly with longer term projects. IRR can be useful, however, when comparing projects of equal risk, rather than as a fixed return projection.
Calculating IRR
The simplest example of computing an IRR is by using the example of a mortgage with even payments. Assume an initial mortgage amount of $200,000 and monthly payments of $1,050 for 30 years. The IRR (or implied interest rate) on this loan annually is 4.8%.
Because the a stream of payments is equal and spaced at even intervals, an alternative approach is to discount these payments at a 4.8% interest rate, which will produce a net present value of $200,000. Alternatively, if the payments are raised to, say $1,100, the IRR of that loan will rise to 5.2%.
The formula for IRR, using this example, is as follows:
• Where the initial payment (CF1) is $200,000 (a positive inflow)
• Subsequent cash flows (CF 2, CF 3, CF N) are negative $1050 (negative because it is being paid out)
• Number of payments (N) is 30 years times 12 = 360 monthly payments
• Initial Investment is $200,000
• IRR is 4.8% divided by 12 (to equate to monthly payments) = 0.400%

Power of Compounding

IRR is also useful in demonstrating the power of compounding. For example, if you invest $50 every month in the stock market over a 10-year period, that money would turn into $7,764 at the end of the 10 years with a 5% IRR, which is approximately twice the current 10-year Treasury (risk-free) rate.
In other words, to get a future value of $7,764 with monthly payments of $50 per month for 10 years, the IRR that will bring that flow of payments to a net present value of zero is 5%.
Compare this investment strategy to investing a lump-sum amount: to get the same future value of $7,764 with an IRR of 5%, you would have to invest $4,714 today, in contrast to the $6,000 invested in the $50-per-month plan. So, one way of comparing lump-sum investments versus payments over time is to use the IRR.

Other IRR Uses

IRR analysis can be useful in dozens of ways. For example, when the lottery amounts are announced, did you know that a $100 million pot is not actually $100 million? It is a series of payments that will eventually lead to a payout of $100 million, but does not equate to a net present value of $100 million.
In some cases, advertised payouts or prizes are simply a total of $100 million over a number of years, with no assumed discount rate. In almost all cases where a prize winner is given an option of a lump-sum payment versus payments over a long period of time, the lump-sum payment will be the better alternative.
Another common use of IRR is in the computation of portfolio, mutual fund or individual stock returns. In most cases, the advertised return will include the assumption that any cash dividends are reinvested in the portfolio or stock. Therefore, it is important to scrutinize the assumptions when comparing returns of various investments.
What if you don't want to reinvest dividends, but need them as income when paid? And if dividends are not assumed to be reinvested, are they paid out or are they left in cash? What is the assumed return on the cash? IRR and other assumptions are particularly important on instruments like whole life insurance policies and annuities, where the cash flows can become complex. Recognizing the differences in the assumptions is the only way to compare products accurately.

The Bottom Line

As the number of trading methodologies, mutual funds, alternative investment plans and stocks have been increasing exponentially over the last few years, it is important to be aware of IRR and how the assumed discount rate can alter results, sometimes dramatically.
Many accounting software programs now include an IRR calculator, as do Excel and other programs. A handy alternative for some is the good old HP 12c financial calculator, which will fit in a pocket or briefcase.

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