Key Takeaways
- • KMLM structure: KraneShares Mount Lucas Managed Futures Index Strategy ETF provides exposure to 22 liquid futures contracts (11 commodities, 6 currencies, 5 global bond markets) traded on U.S. and foreign exchanges, benchmarked to the KFA MLM Index.
- • Sub-advisor expertise: Mount Lucas Management, founded in 1986 and based in Newtown, PA, serves as sub-advisor and established the first passive index measuring risk-bearing returns in futures markets in 1988, providing institutional-grade systematic trend-following strategy.
- • Differentiated positioning: Unlike competing managed futures ETFs, KMLM deliberately excludes equity futures and avoids volatility targeting, maintaining zero equity exposure and negative correlation to stocks to function as a true portfolio diversifier.
- • Diversification across asset classes: The three baskets of commodities, currencies, and fixed income futures are weighted by historical volatility with equal dollar weighting within each basket, reducing concentration risk and providing uncorrelated hedge to traditional equity and bond portfolios.
- • Low-cost alternative structure: KMLM delivers managed futures exposure through a liquid ETF vehicle designed as a hedge on equity, bond, and commodity risk while maintaining systematic, consistent, and cost-effective implementation.
Summary
KMLM (KraneShares Mount Lucas Managed Futures Index Strategy ETF) represents a specialized approach to managed futures investing, structured as a liquid ETF that provides exposure to 22 futures contracts spanning three primary asset classes: 11 commodities, 6 currencies, and 5 global bond markets. All contracts are traded on U.S. and foreign exchanges and are included in the fund's benchmark, the KFA MLM Index. The portfolio construction methodology weights the three baskets by their relative historical volatility, with constituent markets within each basket equally weighted on a dollar basis. This approach ensures broad diversification without concentration in any single sector or asset class.
Mount Lucas Management, the fund's sub-advisor, brings institutional credibility and a four-decade track record to the strategy. Founded in 1986 and headquartered in Newtown, PA, Mount Lucas established the first passive index to measure returns from risk-bearing in futures markets in 1988. The firm's systematic trend-following methodology is designed to provide "pure systematic trend following exposure in a consistent, efficient, and cost effective manner," according to the firm's index objectives. Mount Lucas handles day-to-day trading operations and portfolio management.
A critical differentiator for KMLM compared to competing managed futures ETFs is its explicit exclusion of equity futures and rejection of volatility targeting methodologies. This positioning creates zero equity exposure and maintains negative correlation to stocks, making KMLM function as a true diversifier within traditional equity and bond-heavy portfolios. According to available sources, the fund is positioned as a potential hedge on equity, bond, and commodity risk simultaneously. This structural choice reflects a deliberate philosophy to avoid the equity-like beta that many competitor funds introduce.
The ETF structure provides institutional and alternative investment professionals with low-cost access to systematic managed futures strategies through a liquid vehicle. The fund seeks to track the KFA MLM Index performance before fees and expenses, offering cost efficiency compared to traditional active managed futures vehicles or separately managed accounts. For hedge fund managers, family offices, and institutional investors seeking uncorrelated portfolio diversification, KMLM's design addresses a specific need: managed futures exposure without embedded equity risk or dynamic volatility adjustments that may reduce trend-following efficacy.
Mount Lucas Management, the fund's sub-advisor, brings institutional credibility and a four-decade track record to the strategy. Founded in 1986 and headquartered in Newtown, PA, Mount Lucas established the first passive index to measure returns from risk-bearing in futures markets in 1988. The firm's systematic trend-following methodology is designed to provide "pure systematic trend following exposure in a consistent, efficient, and cost effective manner," according to the firm's index objectives. Mount Lucas handles day-to-day trading operations and portfolio management.
A critical differentiator for KMLM compared to competing managed futures ETFs is its explicit exclusion of equity futures and rejection of volatility targeting methodologies. This positioning creates zero equity exposure and maintains negative correlation to stocks, making KMLM function as a true diversifier within traditional equity and bond-heavy portfolios. According to available sources, the fund is positioned as a potential hedge on equity, bond, and commodity risk simultaneously. This structural choice reflects a deliberate philosophy to avoid the equity-like beta that many competitor funds introduce.
The ETF structure provides institutional and alternative investment professionals with low-cost access to systematic managed futures strategies through a liquid vehicle. The fund seeks to track the KFA MLM Index performance before fees and expenses, offering cost efficiency compared to traditional active managed futures vehicles or separately managed accounts. For hedge fund managers, family offices, and institutional investors seeking uncorrelated portfolio diversification, KMLM's design addresses a specific need: managed futures exposure without embedded equity risk or dynamic volatility adjustments that may reduce trend-following efficacy.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.