Similar to hedge funds, managed futures funds are run by fund managers who pool investors' money and invest it in various financial instruments. However, managed futures are more regulated than hedge funds. Managed futures funds are investments in futures or options in the commodities, currency and interest rate markets [source: J.P. Turner & Company]. Futures and options are essentially bets on how a particular equity or investment will perform. A future is a contract to buy a certain amount of a commodity, stock or even currency at a set price at a set date. The buyer or the seller can then make money, depending on how the actual price rises or falls compared to the agreed upon price. Options are mostly the same, except that they provide the buyer with an option to buy the investment, not an obligation.
Managed futures funds are also more accessible than hedge funds. While investors are typically high-net-worth, many managers have low minimum investments in the $5,000 range [source: J.P. Turner & Company]. Managed futures can help keep a portfolio diverse, since they usually do not follow the trends of other markets. However, the nature of the funds as a form of predicting the performance of other markets makes them very high risk [source: Morgan Stanley Smith Barney].