Key Takeaways
- • Managed futures employ quantitative trend-following strategies, going long and short in underlying futures markets without regard to fundamental analysis or market direction, generating non-correlated returns to traditional stock-bond portfolios.
- • Win rate differs sharply from profit profile: Tim Pickering, president of Auspice Capital Advisors, notes that trend-following strategies are typically correct only 40% of the time but structure winning trades to average three units of capital versus one unit for losses, creating positive expected value.
- • Two primary ETF vehicles manage significant assets: Auspice Capital operates the Horizons Auspice Managed Futures Index ETF (HMF) and the iShares Broad Commodity Index Fund (CBR), offering institutional and retail investors access to diversification strategies.
- • Quantitative, non-biased decision-making is core to strategy execution, requiring algorithms to remain fundamentally agnostic and avoid the behavioral pitfall of attempting to identify perfect entry and exit points in markets.
Summary
Tim Pickering, president and CIO of Auspice Capital Advisors, explains that managed futures strategies operate on a trend-following thesis, capturing directional moves in futures markets by simultaneously taking long and short positions depending on identified trends. This "direction-agnostic" approach distinguishes managed futures from traditional long-only equity strategies, enabling portfolio managers to generate returns regardless of whether markets rise or fall. The strategy's core strength lies in its ability to add diversification to conventional stock-and-bond portfolios, which remains particularly valuable in volatile or range-bound market environments.
The quantitative foundation of managed futures execution proves essential to achieving non-correlated returns. Pickering emphasizes that decisions must be driven entirely by quantitative measures rather than fundamental analysis or market outlook, eliminating the behavioral biases that typically plague discretionary managers. This systematic approach specifically prevents the common mistake of attempting to identify perfect market inflection points—a goal Pickering characterizes as "extremely challenging." Instead, the objective is disciplined participation in emerging trends once sufficient technical evidence accumulates.
The strategy's performance mechanics reveal a counterintuitive but powerful framework. Pickering notes that trend-following strategies typically generate positive returns despite being wrong approximately 60% of the time, versus correct only 40% of the time. This apparent paradox resolves through asymmetric position sizing: average winning trades capture approximately three units of capital per trade, while average losses are limited to one unit. This 3-to-1 win-to-loss ratio ensures positive expected value even when the majority of individual trades result in losses, aligning the strategy's mathematical structure with long-term profitability.
Auspice Capital manages two primary ETF vehicles implementing this framework: the Horizons Auspice Managed Futures Index ETF (HMF) and the iShares Broad Commodity Index Fund (CBR), providing institutional and retail investors structured access to managed futures exposure and commodity diversification strategies.
The quantitative foundation of managed futures execution proves essential to achieving non-correlated returns. Pickering emphasizes that decisions must be driven entirely by quantitative measures rather than fundamental analysis or market outlook, eliminating the behavioral biases that typically plague discretionary managers. This systematic approach specifically prevents the common mistake of attempting to identify perfect market inflection points—a goal Pickering characterizes as "extremely challenging." Instead, the objective is disciplined participation in emerging trends once sufficient technical evidence accumulates.
The strategy's performance mechanics reveal a counterintuitive but powerful framework. Pickering notes that trend-following strategies typically generate positive returns despite being wrong approximately 60% of the time, versus correct only 40% of the time. This apparent paradox resolves through asymmetric position sizing: average winning trades capture approximately three units of capital per trade, while average losses are limited to one unit. This 3-to-1 win-to-loss ratio ensures positive expected value even when the majority of individual trades result in losses, aligning the strategy's mathematical structure with long-term profitability.
Auspice Capital manages two primary ETF vehicles implementing this framework: the Horizons Auspice Managed Futures Index ETF (HMF) and the iShares Broad Commodity Index Fund (CBR), providing institutional and retail investors structured access to managed futures exposure and commodity diversification strategies.
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