Berkowitz Futures Advisory Inc.

• Position: Business Profile - Company Profile

To many people, the word "futures" has always seemed out of place in the same sentence with the word "investments." According to Herb Berkowitz, president of Berkowitz Futures Advisory Inc. of Anchorage, that is rapidly changing.

Business Week specifically included managed futures -- contracts for specific commodities bought or sold for delivery at a later date -- in its investment spectrum for 1992. As Business Week put it: "The investment world is more than just stocks and bonds. How about commodities? You can cut down on the risk by investing through a managed commodity fund."

Berkowitz points out that major pension plan sponsors, such as the State of Virginia, the City of Detroit and Eastman Kodak Company have added managed futures to their asset mixes.

Perhaps no other investment, however, is so widely misunderstood. Unlike the stock market, where an investor buys and owns an asset, the futures market transfers the economic risk of price change over a limited time frame. A commodity trading advisor, such as BFA, takes "long" and "short" positions in a carefully selected mix of commodity contracts with a view toward catching profitable moves for its clients.

Although some have likened commodity speculation to gambling, Berkowitz considers the resemblance superficial. "The futures markets are definitely volatile," says Berkowitz. "But the resemblance to gambling stops there. These markets are part of the real economy and there is no 'house' that has you at a fixed mathematical disadvantage."

"If excitement rather than profit is your real objective," says Berkowitz, "you should get on a plane to Las Vegas."

According to statistics compiled by the Managed Futures Association, managed futures outperformed both U.S. and foreign stocks, as well as bonds, over the decade of the 1980s. "No one can guarantee profitability for any investment and, of course, there is always risk of loss," says Berkowitz. "But the fact remains that few investments offer this degree of non-correlated diversification."

Berkowitz Futures caters to the serious, long-term investor. Asked why BFA has set $100,000 as a minimum account size, Berkowitz explains that proper futures market diversification requires capital. "It is never our practice to throw money at the markets, and sometimes the best position in the markets is no position at all. But when opportunity knocks, you need to have the capital to move quickly."

He notes, however, that it is common for a large...