Modern Prot Folio Theory

8/6/2019 Modern Prot Folio Theory

1/15

MOD ERN

PORTFOLIO

THEORYDynamic Diversifcation

For Todays Investor

MOD ERN

PORTFOLIO

THEORYDynamic Diversifcation

For Todays Investor

$25.00 U.S.


2/15


3/15


4/15

After any disaster, one of the most intelligent and logical

things one may ask is, How could the disaster havebeen prevented? For many investors who suffered thenancial disaster of substantial stock market losses, theanswer lies in Modern Portfolio Theory!

Modern Portfolio Theory (MPT) is also called portfoliotheory or portfolio management theory. MPT is asophisticated investment approach rst developed byProfessor Harry Markowitz of the University of Chicago, in1952. Thirty-eight years later, in 1990, he shared a NobelPrize with Merton Miller and William Sharpe for what hasbecome the frame upon which institutions and savvyinvestors construct their investment portfolios!

Modern Portfolio Theory allows investors to estimate boththe expected risks and returns, as measured statistically,for their investment portfolios. In his article PortfolioSelection (in the Journal of Finance, in March 1952),Markowitz described how to combine assets into efcientlydiversied portfolios. He demonstrated that investorsfailed to account correctly for the high correlationamong security returns. It was his position that aportfolios risk could be reduced and the expectedrate of return increased, when assets with dissimilarprice movements were combined. Holding securitiesthat tend to move in concert with each other doesnot lower your risk. Diversication, he concludedreduces risk only when assets are combined whoseprices move inversely, or at different times, in relationto each other.

Dr. Markowitz was among the rst to quantify riskand demonstrate quantitatively why and how portfoliodiversication can work to reduce risk, and increasereturns for investors. Thats why he probably received theNobel Prize!

Diversication reduces volatility more efciently than

most people understand: The volatility of a diversiedportfolio is less than the average of the volatilities of itscomponent parts.

While the technical underpinnings of MPT arecomplex, and drawn from nancial economics,probability and statistical theory, its conclusion

is simple and easy to understand: A diversied

portfolio, of uncorrelated asset classes, can providethe highest returns with the least amount of volatility

Manyinvestors are under the delusion that their portfoliosare diversied if they are in individual stocks, mutuafunds, bonds, and international stocks. While theseare all different investments, they are all still in thesame asset class and generally move in concert witheach other. When the bubble burst in the stock marketthis was made painfully clear! Proper diversicationaccording to MPT, is in different asset classes thatmove independently from one another.

One of the most uncorrelated and independentinvestments versus stocks is professionally managedfutures. The value of professionally managed futures wasthoroughly researched by Dr. John Lintner, of HarvardUniversity, in a 1983 landmark study, The Potential Roleof Managed Futures Accounts in Portfolios of Stocks andBonds.

Lintner wrote that the combined portfolios of stocks(or stocks and bonds) after including judiciousinvestments ...in leveraged managed futures accountsshow substantially less risk at every possible level ofexpected return than portfolios of stocks (or stocksand bonds) alone. Lintner specically showedhow managed futures can decrease portfolio riskwhile simultaneously enhance overall portfolioperformance.

The risk of loss in trading futures can be substantialAn investor could potentially lose more than the initiainvestment.

Modern Portfolio Theory:

Dynamic Diversication For Todays Investor

2


5/15

THE IMPACT OF PORTFOLIO DIVERSIFICATION

PERCENT

RETURNS

20

15

10

5

0

100% STOCKS &BONDS PORTFOLIO

80% STOCKS & BONDS,20% MANAGED FUTURES

PORTFOLIO

Annualized Standard Deviation

AnnualizedReturn

13.4%

13.2%

13.0%

12.8%

12.6%

12.4%

Potential Impact of Managed Futures on the Traditional Portfolio January 1980 - May 2003

9% 9.5% 10% 10.5% 11% 11.5%


6/15

BarclayCTA Index

BarclayCTA Index

S&P 500Index

S&P 500Index

+64% +33%

+24% -5%

+17% +22%

+24% +23%

+9% +6%

+26% +32%

+4% +19%

+57% +5%

+22% +17%

+2% +32%

+21% -3%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

+4% +31%

-1% +8%

+10% +10%

-1% +1%

+14% +38%

+9% +23%

+11% +33%

+7% +29%

-1% +21%

+8% -9%

+1% -12%

+12% -10%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

S&P Returns Compared to Barclay Index

Graph #3 empirically shows the non-correlation of managed futures to the S&P 500.

Graph #3

4

The Barclay CTA Index is a leading industrybenchmark of Commodity Trading Advisors. There arecurrently 326 programs included in the calculation ofthe Barclay CTA Index, which is underweighted and

rebalanced at the beginning of each year. To qualifyfor inclusion in the CTA Index, an advisor must havefour years of prior performance history. Additionalprograms introduced by qualied advisors are notadded to the index until after their second year. Theserestrictions, which offset the high turnover rates oftrading advisors as well as their articially high short-term performance records, ensure the accuracy andreliability of the Barclay CTA Index.

THIS MATERIAL MENTIONS SERVICES WHICHRANK THE PERFORMANCE OF COMMODITYTRADING ADVISORS. PLEASE NOTE THATTHE RANKINGS ONLY APPLY TO THOSE CTAsWHICH SUBMIT THEIR TRADING RESULTS.THE RANKINGS IN NO WAY PURPORT TO BEREPRESENTATIVE OF THE ENTIRE UNIVERSEOF COMMODITY TRADING ADVISORS. THE

MATERIAL IN NO WAY IMPLIES THAT THESERESULTS ARE OFFICIALLY SANCTIONEDRESULTS OF THE COMMODITY INDUSTRY.

Graph #4

Managed Futures Correlation with Other Asset Classes

Graph #4 further illustrates managed futures historical non-correlated performance to stocks and bonds.Values of 1.000 imply a high correlation, while near zero indicate little or no correlation. Note managedfutures low historic correlation to stocks, bonds and international equities. As Graphs 3, 4, and 6show, managed futures is virtually non-correlated to stocks, and can provide a portfolio with the ability toperform when traditional markets such as stocks and bonds experience difculty.

Source: The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance data for stocks , bonds, and international equities

respectively, are provided by Thompson Financial Software Solutions (Boston, MA). The Barclay CTA Index performance data for managed futures is

provided by the Barclay Trading Group (Faireld, IA).

Managed Futures vs. International Equities

Managed Futures vs. Bonds

Managed Futures vs. Stocks

International Equities vs. Bonds

International Equities vs. Stocks

Bonds vs. Stocks

-0.0160

-0.0270

0.0320

0.1900

0.5100

0.3260

Less Correlated More Correlated


7/15

Graph #5: Worst Case DeclinesAnd how managed futures performed over the same time period.

30%

20%

10%

0

-10%

-20%

-30%

-40%

-50%

-60%

-70%

-80%

-15.7

26.3 21.0 23.4

-44.7

-75.0

-50.7S&P 5002

NASDAQ3

International2

Stocks

Managed Futures: Barclay CTA Index.Greatest drawdown 6-89 through 10-89.S&P 500 Total Return Index. Greatest drawdown 8-00 through 9-02.NASDAQ Composite Index. Greatest drawdown 2-00 through 9-02.

International Stocks & Morgan Stanley Capital InternationalEurope, Australia, and Far East (EAFE) Index.Greatest drawdown 12-99 through 3-03.

1

2

3

4

Source: Barclay Trading Group. LTD.Managed Futures

1

Managed Futures1

Managed Futures1

Managed Futures1

v

Jan92

Jul92

Jan93

Jul93

Jan94

Jul94

Jan95

Jul95

Jan96

Jul96

Jan97

Jul97

Jan98

Jul98

Jan99

Jul99

Jan00

Jul00

Jan01

Jul01

Jan02

Jul02

Jan03

Jul03 U

.S.

Stocks,

Dow

JonesindustrialAverage

CommodityM

arkets,

Dow

Jones-AIG

Commodityindex

10-YearT-No

tes

Volatility

Futures Markets Frequently Display Lower Volatility than U.S. Equities or Interest Rate Instruments12-Month Price Volatility 1992-2003

45

40

35

30

25

20

15

10

5

0

Contrary to popular belief, Graph #6, extracted from the Chicago Board of Trades 2003 edition of PortfolioDiversication Opportunities shows that at certain times futures markets frequently display less volatility than inU.S. equities and interest rate instruments. Bear in mind in futures, the potential exists to lose more than your initialinvestment.

Futures Markets Frequently Display Lower Volatility than U.S. Equities or Interest Rate Instruments (12- Month Price Volatility, 1992-2003)

Graph #6

Graph #5 clearly shows the diversication benetsof managed futures potentially increasing prots& reducing risk in an overall investment portfolio.Note how managed futures performed duringthe worst declines in stocks! Individual resultsmay vary. A customer may not experience theseresults in the future.

Graph #5

Worst Case Declines and How Managed Futures Performed Over the Same Time Period

6

5


8/15

Source/December 1995: S&P 500, BARRA/MLM Index. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OFFUTURE RESULTS. THE RISK OF SUBSTANTIAL LOSS EXISTS IN FUTURES TRADING.

Four Major S&P Advances Since 1961 andCorresponding Futures Performance

Bull Stock Market Analysis

FuturesS&P 500

12/74-12/76 3/78-11/80 8/82-8/87 11/90-12/95

37.8%

135.2%

80.4%

278.6%

86.4%

48.2%

85.9%

21.3%

Four Worst S&P Drawdowns Since 1961 andCorresponding Futures Performance

Bear Stock Market Analysis

FuturesS&P 500

12/68-6/70 1/73-9/74 12/80-7/82 9/87-11/87

Source/December 1995: S&P 500, BARRA/MLM Index. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OFFUTURE RESULTS. THE RISK OF SUBSTANTIAL LOSS EXISTS IN FUTURES TRADING.

-16.6%

-29.6%

3.1%

74.5%

-42.6%

143.7%

37.1%

-29.2%

S&P Bear & Bull Stock Market Analysis (major advances and drawdowns since 1961 and corresponding futures performance)

Graph #7a

Graph #7b

Graphs #7a and #7b provides further support for the non-correlation of futures to stocks. Note how in all ofthe worst declines for stocks listed, futures were positive. And even in all the stock markets best periods,futures were also positive.

Past performance is not indicative to future results. The risk of loss exists in futures trading.

6


9/15

The Time Variation in the Benets of Managed Futures

A new academic paper, The Time Variation in the Benets of Managed Futures,appeared in the Spring edition of The Journal of Alternative Investments. Thereport strongly supports much of the ndings in previous studies on managedfutures. Some of these points were brought out in the August 2003 edition ofManaged Account Reports:

Utilizing even a small allocation of managed futures limits portfolio risk by astatistically signicant margin.

The study conrms earlier ndings that managed futures increases return andreduces portfolio risk. A 10% managed futures allocation was allocated for thestudy.

More conservative investors may gain from allocating a portion of their portfoliosthan more aggressive investors.

Conservative portfolios experienced an increase in return in more than 50% of theyears. The study went back 40 years.

The risk reduction benets of managed futures were quite pronounced. 98% ofthe years where managed futures were included in each portfolio, experiencedan increase in the portfolios Sharpe ratio. The Sharpe ratio is a measure of riskmanagement. The higher the ratio, the lower the risk.

Managed futures highest performance periods were in periods of risinginterest rates. Many believe we are now in such a period.

Past performance is not necessarily indicative of future results. The risk of substantialloss exists in futures trading.

7


10/15

Hypothetical Examples of Adding Managed Futures to a Stock and Bond Portfolio

The chart below should prove helpful in understanding how a relatively small investment inmanaged futures can increase overall portfolio performance:

Lets assume your total portfolio is $250,000 and you invest 80% in stocks and bonds ($200,000) and 20%in managed futures ($50,000). Lets assume at the end of the year you realize a 5% return on your stocksand bonds and a 25% return on managed futures. The result would be as follows:

$250,000 Portfolio % of Portfolio Return

Stocks & Bonds $200,000 80% 5% Prot $10,000

Managed Futures $50,000 20% 25% Prot $12,500

Total Prot $22,500

Now lets assume you earn 10% on the 80% of your portfolio invested in stocks and bonds, but lose 25% inmanaged futures. The results would be as follows:

$250,000 Portfolio % of Portfolio Return

Stocks & Bonds $200,000 80% 10% Prot $20,000

Managed Futures $50,000 20% 25% Loss ($12,500)

Total Prot $7,500

You can see, in these hypothetical examples, by investing only 20% of your portfolio in futures, ifyou were to earn 25%, it would outperform 80% of your portfolio invested in stocks and bonds if thestocks and bonds earned 5%.

You can also see that a 25% loss in futures would still leave you with a net prot of $7,500 if your

stock and bond allocation returned 10%. These hypothetical examples both show a positive result. Therisk associated with futures trading could potentially result in a loss greater than the initial investment, andthe overall results could be negative.

Note: No matter what the size of your portfolio, 80% invested in stocks and bonds and 20% invested inmanaged futures, with the same percentage returns, would produce the same percentage results in ourhypothetical examples.

Important Disclaimer: The above hypothetical examples are strictly for illustration purposes only, to helpyou better understand the potential impact of portfolio diversication.

In no way are the examples to be construed as the returns you might receive in stocks and commodities. Ofcourse, in actual investing, your results can be better or worse.

8


11/15

With the bursting of the stock markets bubbleProfessor Schneeweiss ndings are now generallyaccepted among investors! The paper was preparedfor educational purposes and does not addressthe signicant risks inherent in futures trading

Futures trading is not suitable for all investors. Aninvestor could potentially lose more than the initiainvestment.

Technically speaking, futures are riskier than stocksbecause of the greater leverage in futures and potentialfor unlimited risk. Over-leveraging a futures tradingaccount without utilizing prudent money management

could result in potentially substantial losses or prots.In our opinion, that would constitute high stakesgambling, not investing.

In over 20 years of observing traders and seeingmany millions of dollars made and lost, we believe theunprofessional use of leverage and the lack of prudentmoney management are the culprits that can renderfutures riskier than stocks. Place futures in the hands ofan accomplished CTA, and we strongly believe the riskin futures becomes no greater than with stocks.Viewingdeclines in some of the biggest and supposedly safeststocks in America is testimony to our opinion. The fact is,widely popular bluechip stocks like Microsoft, G.E., Pzer,IBM, and many other solid stocks have experiencedgreater drawdowns than most of our CTAs! Bear in mindthere is the potential to lose more than your intial investmentin futures no matter who is managing your money.

Truth be told, its not the investment vehicle thatmakes or loses money, but rather the individual orindividuals managing it. Stocks and futures are bothinvestment vehicles employed by money managers as ameans of earning prots. Some managers succeed whereothers fail, regardless of the conveyance. Doesnt it then

stand to reason: Its the money managers skills, abilities,and investment acumen that will determine investingresults, not the investment vehicle?

On a level playing eld, managed futures investing isindeed, no riskier than stocks! This truth is broughtout by Thomas Schneeweis, Professor of Finance, atthe University of Massachusetts in his eye-opening,June 2002 academic study, Benets of ManagedFutures, in which he destroys the myth of managedfutures being more risky than stocks. Schneeweisstates: (See page 7 for additional conrmation ofSchneeweiss conclusions.)

Managed futures are not more risky thantraditional equity investment. Investment ina single commodity trading advisor is shownto have risks and returns which are similarto investment in a single equity. Moreover, aportfolio of commodity trading advisors are alsoshown to have risks and returns which are similarto traditional equity portfolio investments.

If an unskilled person attempted to practice law ormedicine, he or she would probably perform quite poorly

just like many non-professional and unskilled do yourself futures traders. So it comes as no surprise thain the highly complex and challenging eld of commodityfutures trading, the vast majority of non-professionalamateur traders do lose. In fact, we often hear statisticsthat as much as 90% of these do it yourself futures traders

wind up losing. However, more experienced professionaCommodity Trading Advisors (CTAs) have beenshown to achieve substantial, highly attractive returns

CTAs are federally licensed and registered professionamoney managers who manage investors assetsusing investments in the commodities markets

just as a stock mutual fund manager would inveshis clients assets in a variety of different stocks

Studies have shown professional Commodity TradingAdvisors do experience an appreciably higher successrate than the individual amateur trader. The fac

is, there are numerous Commodity Trading Advisorswith consistent returns achieved through prudenmoney management! You are, however, subject to therisk of loss no matter who is managing your money

The establishment of global futures exchanges andthe accompanying increase in actively traded contracofferings have allowed CTAs to diversify by geography aswell as by product. For example, through CTA managedaccounts, investors can participate in at least 50 differenmarkets worldwide, including stock indexes, nanciainstruments, agricultural and tropical products, preciousand nonferrous metals, currencies, and energy products

CTAs offer ample opportunity for prot potential andrisk reductions among a broad array of non-correlatedmarkets.

*THIS MATERIAL MENTIONS SERVICES WHICH RANK THE PERFORMANCEOF COMMODITY TRADING ADVISORS. PLEASE NOTE THAT THE RANKINGSONLY APPLY TO THOSE CTAs WHICH SUBMIT THEIR TRADING RESULTSTHE RANKINGS IN NO WAY PURPORT TO BE REPRESENTATIVE OF THEENTIRE UNIVERSE OF COMMODITY TRADING ADVISORS. THE MATERIALIN NO WAY IMPLIES THAT THESE RESULTS ARE OFFICIALLY SANCTIONEDRESULTS OF THE COMMODITY INDUSTRY.

What are ProfessionalCommodity Trading Advisors (CTAs)?

9

Are Managed FuturesRiskier than Stocks?


12/15


13/15

Our CTA Selection Process

Vision is one of the largest providers of Introducing BrokeServices in the futures industry and ranked by FuturesMagazine among the top fty largest Futures CommissionMerchants in the U.S. Vision is a registered FuturesCommission Merchant (FCM) with the CommodityFutures Trading Commission as well as a CommodityPool Operator. Vision is a member of the NationaFutures Association. Howard Rothman, the President oVision, was elected in January 1990 by the IntroducingBroker membership category to serve on the NationaFutures Association Board of Directors, and served threeconsecutive terms.

On behalf of its guaranteed Introducing Brokers andclients, Vision spares no expense or effort in nding CTAsOn an ongoing basis, Vision monitors the potentiallysuccessful CTAs and Professional Traders in order to nd

the best possible trading talent.

Visions CTA selection process is primarily guidedby seeking traders who practice sound moneymanagement while producing consistent returnsFor us, capital preservation is a prerequisitefor capital appreciation! Some of the speciccriteria we generally look for in selecting CTAs are

1. Favorable drawdown-to-return ratios.

the most important question an investor should beasking himself or herself is, What do I have in myportfolio that is non-correlated to stocks, and canpotentially capitalize on a lackluster or bear stockmarket? For informed, suitable investors in the nanciaposition, many believe there isnt a better way to properlydiversify, and help protect an overall stock portfolio, thanincorporating professionally managed futures!

The research, and facts supporting the inclusion ofmanaged futures in an overall investment portfolio areoverwhelming. For many informed and savvy investorsthe question is not if, but how much should be invested inprofessionally managed futures!

In helping you diversify your overall portfolio, wehave constructed several CTA portfolios that canprovide dynamic diversication at an affordable costMany individual CTAs require account minimums inexcess of $250,000. Youll nd our entire portfolios oseveral CTAs are less than what would be required toinvest with one CTA! Consult your Vision Introducing

Broker for the CTAs that best meet your investmentgoals, and affordability.

Dynamic Diversication at anAffordable Cost!

11

Consider what Jack Meyer, the fund manager of HarvardUniversitys huge endowment said about diversifyingHarvard Universitys portfolio with futures:

Holding commodities offers protection againstthe ups and downs of stocks and bonds.Referring to commodities, he added, Theyrethe most diversifying asset in the portfolio.

Barrons, the newspaper had the following to say aboutHarvard Management Companys Chief ExecutiveOfcer:

In the months after arriving from the RockefellerFoundation back in 1990, one of his biggest

decisions was to settle on diversication as akey theme. Relying on techniques of modernportfolio theory to get the best returns with lowestlevel of risk, Harvard needed to cut its exposureto publicly traded U.S. stocks and bonds, andincrease its investments in foreign stocks,commodities, and private companies. The result:Right now the Harvard endowment has about onlyhalf its portfolio in U.S. stocks and bonds, versusabout 75% for the typical university endowment.Harvard Management Companys Chief Executivewas quoted in the article as saying, The benetsof diversication are indisputable. Diversication

rules. Its powerful and our portfolio is a gooddeal less risky than the S&P 500.

Meyers experience with managed futures stronglysupports Dr. Lintners landmark study mentioned in thisbrochure on page 2.

Harvard University is not alone in using futures in theirinvestment portfolio. Other entities that include futuresin their investment portfolios, include such prestigiousuniversities as Stanford, Notre Dame, major corporations,and state pension funds, such as Detroit and San Diego.

With powerful evidence supporting the value ofprofessionally managed futures and its attractive features,investors have placed over 40 billion dollars in it, makingmanaged futures one of the fastest growing investmentstoday.

Many prominent analysts believe we are in a secular bearmarket, where stocks will underperform for many yearsto come. With the anemic outlook for stocks, we believe


14/15

Past performance is not indicative to future results. The risk of loss exists in futures trading.

12

Doubly Diversied CTA Portfolios

Each CTA has his own unique trading system, and placestrades on the clients behalf, completely independentfrom one another. Our CTAs use their own proprietarytrading systems to trade the markets of their choice.Not only are these CTAs performance non-correlatedwith stock related investments, but also each othersperformance. In effect our CTA portfolios offer doublediversication!

When you examine the dislcosure documents of ourrecommended CTAs, youll discover that, over manymonths some advisors were up and others down. Bearin mind, past performance is not necessarily indicative offuture results. The risk of loss exists in futures trading.One of the only things our CTAs have in common is thatthey have consistent performance records. You will seefor yourself. Not only are the CTAs performance non-correlated to the stock market, but also to each other!

We believe this is what diversication is all about,and the epitome of Modern Portfolio Theory!

2. Recovering from all drawdowns to producenew highs in equity.

3. Worst case drawdowns werent so severe

that an account didnt have enough equityleft to make a recovery that subsequentlyproduced a new high in equity.

4. Consistent annual average returns.

5. CTAs who will reduce management fees forour clients.

IMPORTANT NOTES: Before a CTA is placed onVisions Recommended CTA List, our ComplianceDepartment conducts an on-site audit of the CTAsbooks and records. This is done in order to conrm

the accuracy of the performance record presented inthe CTAs disclosure document.

Visions CTA Selection Process (...contd) The Investment Process

Every clients needs are different. We attempt to matchyou, the investor, with the best possible portfolio that wilhopefully suit:

A. Your investment goals; B. Your time-frame; C. Your comfort zone for volatility (investment

temperament); D. Your type of account (i.e.: IRA, pension, indi

vidual, joint, corporate, etc.); and E. Your comfort level in terms of affordability.

Our experience has led us to believe it is erroneous andself-defeating to adopt a wait-and-see investment stanceby observing how one CTA performs before investing withanother CTA. That would be the equivalent of an investorseeking to build a diversied portfolio, rst buying IBM

and then waiting to see how IBM performs before buyingother stocks. Each CTAs performance is completely inde-pendent of one another.

Some investors may be able to comfortably inveswith multiple CTAs while others will only be able toafford to invest with an individual CTA. Very importantWhatever the amount you decide to invest, we advisein the strongest of terms, that it should be in properproportion to your overall investment portfolio inorder to make a meaningful impact! (Studies showaround 20% of ones investment portfolio can havethe most meaningful impact in terms of the potentia

for increased performance and risk reduction.)

Whatever your investment means, building a portfolio isultimately, a dynamic and collaborative process. We lookforward to working with you in building an appropriateportfolio thats best suited to meet your individual needs!

PLEASE NOTE: An individual must only decide to inveswith a given CTA after receiving, reading, and signingthe government led Disclosure Document from eachrespective CTA.


15/15

QUESTIONS AND ANSWERS

Q: What is a CTA Managed Futures Account?

A: A CTA managed futures account is one where a registeredCommodity Trading Advisor (CTA) is given responsibility tomake all trading decisions. This authority is delegated bythe account holder to the CTA through a limited power ofattorney which may be withdrawn at anytime.

Q: How can I track the performance in my managedaccount?

A: Three ways. One, a complete accounting of the activityin your account, including your account balance can beseen on Visions Internet web site 24 hours a day. Ask yourManaged Futures Specialist for more details. Two, youmay call your Managed Futures Specialist who receives adaily equity run detailing all your open positions, netting outprot and losses, showing the exact daily balance in your

account. Three, whether you call or not, a purchase and salestatement (P/S Statement) automatically will be sent to youon every single trade, showing the date and price entered;when you exit a trade, the date, price, and net prot or loss onthe trade as well as your account balance. Besides receivingconrmation on each individual transaction, a summary ofall transactions showing their results are sent each monthfor the entire months transactions. Instead of having yourstatements post ofce mailed, you can select having yourP/S statements e-mailed directly to you! Therefore, evenwithout calling, you will have a written, detailed breakdownof the CTAs transactions and performance in your account.However, we strongly advise that you not evaluate the

performance in your account on a trade-by-trade or day-to-day basis. We believe a managed account is a long-terminvestment and should be evaluated as such.

Q: How does my CTA get paid for managing myaccount?

A: Most CTAs receive an on-going management fee on theaccount balance in the range of 2% to 4% per year, whetherthe account is protable or not, and an incentive fee thatvaries widely depending on the CTA. These fees are usuallypaid either monthly or quarterly which is detailed in eachCTAs disclosure document. However, Vision has negotiatedwith the majority of its CTAs, for the benet of Visions

Introducing Brokers clients, that the CTAs waive or reducetheir on-going management fees. THE MAJOR SOURCEOF INCOME FOR THE MAJORITY OF VISIONS CTAsIS AN INCENTIVE FEE THAT CAN ONLY BE EARNEDBY PRODUCING ON-GOING NEW PROFITS FOR ANACCOUNT! (Net of all costs.)

Q: How accessible are my funds in a managed account?

A: A managed account offers a high degree of liquidity.Although we strongly advise you to view your managed

account as a long-term investment, part or all of your fundsare usually available on one days notice.

Q: If I am an experienced futures trader, why should have a managed account?

A: There are numerous top-performing CTAs who havemanaged accounts with other CTAs. When you are tradingyour own account, you are limited to your trading system andstyle. By diversifying with CTAs who have good performancerecords, you are, in effect, constructing a diversied tradersportfolio of your own, the merits of which are discussed inthis brochure.

Q: Are there any tax benets to investing in managedfutures?

A: Yes. According to the Tax Act of 1981, short-term protsin commodities are treated as 60% long term and 40% shorterm. On the other hand, short term trading prots in stocksare treated as 100% short term. A short-term investment isone that is held for less than one year. This favorable taxtreatment in commodities can translate to investors in upper

tax brackets, saving as much as 30% on taxes in short termgains on commodities versus stocks!

Q: Where is my money kept?

A: Your money is held in a Customer Segregated Account byVision at an established nancial institution. Vision is a well-established and strongly capitalized Futures CommissionMerchant (FCM). Vision currently holds the customer equityand is the FCM of choice of over 130 Introducing Brokerrms as well as numerous professional traders and CTAsVision ranks among the top fty largest FCMs in the U.SSince its inception, Vision has maintained substantially moreregulatory capital than is required to maintain its customeequity. Visions President and Chief Financial Ofcer isHoward Rothman who served on the Board of Directors othe National Futures Association for three consecutive termsMr. Rothman was also a director and founding member of theNational Introducing Broker Association.

Q. Can I use retirement funds in a managed account?

A. Absolutely. You can use IRA, trust, pension, and otheretirement monies. You can use managed futures in a varietyof qualied retirement plans including IRAs, trusts, andpensions.

Q: How do I open a managed account?

A: Before opening a managed account, you must be suppliedwith a copy of the CTAs disclosure document. Read icarefully before you invest. Go over questions you may havewith your Managed Futures Specialist. After any questionsyou may have are answered, have your Managed FuturesSpecialist help you ll out the management agreemenwith the CTA and Visions customer agreement formsboth of which should be sent to your Introducing Broker forprocessing.

13

Documents

Modern Prot Folio Theory