Key Takeaways
- • Fortem Capital launched a daily-dealing UCITS managed futures fund designed to reduce cost drag and manager selection risk by using DBi's managed futures replication framework rather than traditional CTA allocation.
- • The fund implements a "convex overlay" strategy funded from efficiency gains, targeting what Fortem calls "Armageddon Alpha"—concentrated protection during severe equity dislocations when traditional trend-following strategies underperform, rather than continuous downside hedging.
- • By shifting from active CTA manager selection to a replication-based approach, the fund materially lowers fees while preserving the diversification and return characteristics that make managed futures effective portfolio diversifiers.
- • Kevin Gray, CIO at Fortem Capital, emphasized that the challenge in managed futures has been implementation efficiency rather than the underlying return premium, positioning this launch as solving the access problem for institutional investors.
- • The strategy builds on Fortem's existing Liquid Alternatives Fund, which already incorporates managed futures replication, demonstrating this is an operationally tested approach rather than a theoretical framework.
Summary
Fortem Capital has launched a managed futures fund structured as a daily-dealing UCITS strategy, targeting institutional investors seeking lower-cost access to trend-following strategies. The Fortem Capital Managed Futures Fund employs DBi's managed futures replication framework, a systematic approach designed to capture the core return drivers of the CTA industry while eliminating the traditional inefficiencies associated with active manager selection and fee drag.
The fund's strategic innovation centers on a "convex overlay" mechanism—a targeted hedging layer funded from the cost savings generated by the replication approach. Rather than providing continuous portfolio protection against minor market setbacks, this overlay concentrates protection during what Fortem characterizes as "Armageddon Alpha" scenarios: the severe, fast-moving equity dislocations where traditional trend-following strategies historically falter. This design reflects a deliberate portfolio construction philosophy that matches the protective characteristics of managed futures to their most valuable use case within a diversified allocation.
Kevin Gray, Chief Investment Officer at Fortem Capital, framed the launch as addressing the structural inefficiency in managed futures accessibility. "We have long viewed managed futures as one of the most effective diversifiers available to investors," Gray stated. "The challenge has never been the return premia itself, but the efficiency with which it is accessed." By shifting from traditional CTA manager selection to replication, the fund reduces both cost drag and the risk of manager underperformance, while preserving the diversification benefits that make managed futures valuable in multi-asset portfolios.
The fund structure builds operationally on Fortem's existing Liquid Alternatives Fund, which already incorporates managed futures replication as a core component. This integration demonstrates that the replication approach is not theoretical but has been tested within the firm's broader alternatives strategy. The daily dealing UCITS structure provides institutional investors with liquidity while maintaining the systematic trend-following methodology that underpins managed futures' historical effectiveness as a portfolio diversifier during equity market stress.
The fund's strategic innovation centers on a "convex overlay" mechanism—a targeted hedging layer funded from the cost savings generated by the replication approach. Rather than providing continuous portfolio protection against minor market setbacks, this overlay concentrates protection during what Fortem characterizes as "Armageddon Alpha" scenarios: the severe, fast-moving equity dislocations where traditional trend-following strategies historically falter. This design reflects a deliberate portfolio construction philosophy that matches the protective characteristics of managed futures to their most valuable use case within a diversified allocation.
Kevin Gray, Chief Investment Officer at Fortem Capital, framed the launch as addressing the structural inefficiency in managed futures accessibility. "We have long viewed managed futures as one of the most effective diversifiers available to investors," Gray stated. "The challenge has never been the return premia itself, but the efficiency with which it is accessed." By shifting from traditional CTA manager selection to replication, the fund reduces both cost drag and the risk of manager underperformance, while preserving the diversification benefits that make managed futures valuable in multi-asset portfolios.
The fund structure builds operationally on Fortem's existing Liquid Alternatives Fund, which already incorporates managed futures replication as a core component. This integration demonstrates that the replication approach is not theoretical but has been tested within the firm's broader alternatives strategy. The daily dealing UCITS structure provides institutional investors with liquidity while maintaining the systematic trend-following methodology that underpins managed futures' historical effectiveness as a portfolio diversifier during equity market stress.
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