Key Takeaways
- • Fortem Capital launched a new managed futures fund with daily dealing in a UCITS structure, leveraging DBi's managed futures replication framework to reduce costs and manager selection risk versus traditional CTA allocations.
- • The fund incorporates a targeted convex overlay designed to provide "armageddon alpha"—concentrated protection during severe equity dislocations rather than continuous hedging—funded from efficiency gains generated by the replication approach.
- • The strategy addresses a core challenge in managed futures investing: accessing the diversification benefits of commodities trading advisers (which trade futures, options, and forex contracts) in a liquid, low-cost, accessible format.
- • Kevin Gray, Fortem's chief investment officer, noted that managed futures replication already forms a core component of the firm's liquid alternatives fund, positioning this launch as an operationally validated strategy rather than a theoretical exercise.
- • Andrew Beer, co-founder of DBi, characterized the launch as combining "proven diversification benefits of managed futures combined with prudent risk mitigation" in a fee-efficient, liquid structure—representing a material advancement in allocator accessibility to the strategy.
Summary
Fortem Capital has launched a new managed futures fund offering daily liquidity in a UCITS-compliant structure, addressing a persistent challenge in alternative investment: accessing the diversification benefits of managed futures strategies at scale without the cost and manager selection friction typically associated with direct commodity trading adviser (CTA) allocations.
The fund employs DBi's managed futures replication framework, which seeks to capture the return drivers and risk characteristics of the CTA industry while operating in a liquid, low-cost format. CTAs traditionally specialize in managing portfolios through derivatives including futures, options, and forex contracts across multiple asset classes and time horizons. The replication approach aims to preserve these diversification characteristics while materially reducing both fees and the idiosyncratic risk of selecting individual managers.
A distinctive feature of the strategy is its targeted convex overlay, designed to deliver protection specifically during "fast, equity-led dislocations"—severe market stress events—rather than providing continuous hedging against routine market volatility. Fortem describes this approach as "armageddon alpha." Notably, this protective overlay is funded from a portion of the efficiency gains generated by the replication methodology itself, creating a self-funded risk mitigation mechanism that does not materially increase the fund's overall cost structure.
Kevin Gray, Fortem's chief investment officer, emphasized that the launch represents a practical refinement of a strategy the firm has already embedded within its liquid alternatives fund offering. "Managed futures replication already forms a core component of our liquid alternatives fund, so this is not a theoretical exercise for us," Gray stated, underscoring that the firm has operational experience validating the approach. He characterized managed futures as "one of the most effective diversifiers available to investors" and framed the core innovation as improving the efficiency with which investors access this premium.
Andrew Beer, co-founder of DBi, positioned the launch as a material advancement for institutional allocators, noting that the combination of proven diversification characteristics, prudent risk mitigation, and fee efficiency in a liquid structure represents "a big leap forward" from traditional alternatives. The fund's UCITS designation and daily dealing frequency should appeal to institutional investors requiring regulatory compliance and portfolio liquidity alongside exposure to alternative return drivers.
The fund employs DBi's managed futures replication framework, which seeks to capture the return drivers and risk characteristics of the CTA industry while operating in a liquid, low-cost format. CTAs traditionally specialize in managing portfolios through derivatives including futures, options, and forex contracts across multiple asset classes and time horizons. The replication approach aims to preserve these diversification characteristics while materially reducing both fees and the idiosyncratic risk of selecting individual managers.
A distinctive feature of the strategy is its targeted convex overlay, designed to deliver protection specifically during "fast, equity-led dislocations"—severe market stress events—rather than providing continuous hedging against routine market volatility. Fortem describes this approach as "armageddon alpha." Notably, this protective overlay is funded from a portion of the efficiency gains generated by the replication methodology itself, creating a self-funded risk mitigation mechanism that does not materially increase the fund's overall cost structure.
Kevin Gray, Fortem's chief investment officer, emphasized that the launch represents a practical refinement of a strategy the firm has already embedded within its liquid alternatives fund offering. "Managed futures replication already forms a core component of our liquid alternatives fund, so this is not a theoretical exercise for us," Gray stated, underscoring that the firm has operational experience validating the approach. He characterized managed futures as "one of the most effective diversifiers available to investors" and framed the core innovation as improving the efficiency with which investors access this premium.
Andrew Beer, co-founder of DBi, positioned the launch as a material advancement for institutional allocators, noting that the combination of proven diversification characteristics, prudent risk mitigation, and fee efficiency in a liquid structure represents "a big leap forward" from traditional alternatives. The fund's UCITS designation and daily dealing frequency should appeal to institutional investors requiring regulatory compliance and portfolio liquidity alongside exposure to alternative return drivers.
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