Key Takeaways
- • Investor interest in managed futures ETFs has grown amid rising stock market volatility and higher correlations between stocks and bonds, according to Zacks Investment Research.
- • Managed futures ETFs give individual investors exposure to futures across commodities, currencies, stocks and bonds using systematic, trend-following strategies that can go long or short.
- • Proponents cite diversification, crisis alpha and inflation-hedging potential, while the strategies can struggle in choppy, directionless markets where trends reverse.
- • Named products include the iMGP DBi Managed Futures Strategy ETF (DBMF), the KFA Mount Lucas Index Strategy ETF (KMLM) and the Fidelity Managed Futures ETF (FFUT).
Summary
Investor interest in managed futures products has increased amid rising stock market volatility and higher correlations between stocks and bonds, according to a Zacks Investment Research piece republished by The Globe and Mail. The strategies drew attention in 2022, when many of them rose as both stocks and bonds declined.
Managed futures ETFs provide exposure to futures contracts across commodities, currencies, stocks and bonds. The funds use systematic strategies to identify market trends and adjust positions accordingly, going long when prices are rising and short when they are falling. Zacks notes that this approach allows them to potentially profit in both bull and bear markets. The ETFs offer individual investors access to strategies traditionally used by Commodity Trading Advisors (CTAs), many of which rely on quantitative, trend-following models. Zacks points out that CTAs are not limited to commodities, and that large institutional investors, including major pension funds, have allocated to managed futures for decades.
Zacks identifies three main attractions: portfolio diversification relative to traditional stock and bond holdings, crisis alpha during periods of market stress when stocks and bonds decline together, and a potential hedge against inflation and rising interest rates, depending on positioning. The article cautions that performance depends on market conditions and that these funds can struggle in choppy, directionless markets where trends frequently reverse.
The article profiles three funds. The iMGP DBi Managed Futures Strategy ETF (DBMF) takes long and short positions primarily through futures and forward contracts across equities, fixed income, currencies and commodities. The KFA Mount Lucas Index Strategy ETF (KMLM) tracks an index of long and short managed futures contracts on 11 commodities, 6 currencies and 5 global bond markets. The Fidelity Managed Futures ETF (FFUT) seeks to profit from price trends across equity, fixed income, currency and commodity markets, with the iShares Core S&P 500 ETF (IVV), NVIDIA (NVDA) and Microsoft (MSFT) among its top holdings.
The piece is a syndicated, promotional-style explainer and does not provide fund performance figures or assets under management.
Managed futures ETFs provide exposure to futures contracts across commodities, currencies, stocks and bonds. The funds use systematic strategies to identify market trends and adjust positions accordingly, going long when prices are rising and short when they are falling. Zacks notes that this approach allows them to potentially profit in both bull and bear markets. The ETFs offer individual investors access to strategies traditionally used by Commodity Trading Advisors (CTAs), many of which rely on quantitative, trend-following models. Zacks points out that CTAs are not limited to commodities, and that large institutional investors, including major pension funds, have allocated to managed futures for decades.
Zacks identifies three main attractions: portfolio diversification relative to traditional stock and bond holdings, crisis alpha during periods of market stress when stocks and bonds decline together, and a potential hedge against inflation and rising interest rates, depending on positioning. The article cautions that performance depends on market conditions and that these funds can struggle in choppy, directionless markets where trends frequently reverse.
The article profiles three funds. The iMGP DBi Managed Futures Strategy ETF (DBMF) takes long and short positions primarily through futures and forward contracts across equities, fixed income, currencies and commodities. The KFA Mount Lucas Index Strategy ETF (KMLM) tracks an index of long and short managed futures contracts on 11 commodities, 6 currencies and 5 global bond markets. The Fidelity Managed Futures ETF (FFUT) seeks to profit from price trends across equity, fixed income, currency and commodity markets, with the iShares Core S&P 500 ETF (IVV), NVIDIA (NVDA) and Microsoft (MSFT) among its top holdings.
The piece is a syndicated, promotional-style explainer and does not provide fund performance figures or assets under management.
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