Key Takeaways
- • Seeking Alpha contributor argues that allocating 20-30% of portfolio volatility to CTA (managed futures) may reduce portfolio volatility without compromising returns, though the view rests on a relatively short trading history.
- • The article highlights the Simplify Managed Futures Strategy ETF, which runs a long-short futures strategy with low correlation to equities and has outperformed passive commodity funds, per the author.
- • The author cites elevated equity valuations and potential currency devaluation as reasons investors may favor precious metals and managed futures over stocks and bonds.
- • The author discloses a long position in GLD, USO and SLV and says he may initiate a long position in CTA within 72 hours, which weakens the independence of the recommendation.
Summary
A Seeking Alpha analyst argues that investors seeking lower portfolio volatility should allocate part of their wealth to alternative investments, specifically commodities and managed futures. The author contends that commodities can hedge against inflation expectations and fiat currency volatility, while acknowledging that not all commodity funds have strong historical records.
The article centers on the Simplify Managed Futures Strategy ETF, described as a long-short futures strategy with low correlation to equities. According to the author, CTA's active management and trend-focused models have delivered strong risk-adjusted returns and, since inception, have been among the few with positive returns and low-to-negative equity correlation. The author states that the strategy has outperformed passive commodity funds.
Modeling in the article suggests that allocating 20-30% of portfolio volatility to CTA may reduce portfolio volatility without compromising returns. The author qualifies this conclusion, noting that it is based on a relatively short trading history and therefore carries limited statistical weight.
The author links the case to historically elevated equity valuations and potential currency devaluation, arguing that heavy allocations to precious metals and managed futures could be preferable to stocks and bonds. Readers should note that the author holds long positions in GLD, USO and SLV, and states an intention to possibly buy CTA shares or call options within 72 hours. Seeking Alpha's disclaimer states that its contributors are not licensed advisers and that no recommendation is being made.
The article centers on the Simplify Managed Futures Strategy ETF, described as a long-short futures strategy with low correlation to equities. According to the author, CTA's active management and trend-focused models have delivered strong risk-adjusted returns and, since inception, have been among the few with positive returns and low-to-negative equity correlation. The author states that the strategy has outperformed passive commodity funds.
Modeling in the article suggests that allocating 20-30% of portfolio volatility to CTA may reduce portfolio volatility without compromising returns. The author qualifies this conclusion, noting that it is based on a relatively short trading history and therefore carries limited statistical weight.
The author links the case to historically elevated equity valuations and potential currency devaluation, arguing that heavy allocations to precious metals and managed futures could be preferable to stocks and bonds. Readers should note that the author holds long positions in GLD, USO and SLV, and states an intention to possibly buy CTA shares or call options within 72 hours. Seeking Alpha's disclaimer states that its contributors are not licensed advisers and that no recommendation is being made.
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