Key Takeaways
- • KMLMsim, a simulated managed futures track, compounded at 3.42% annually from January 1, 2008 through the article date versus 11.30% for SPY and 8.43% for a 60/40 portfolio, according to the author's Testfol.io analysis.
- • The author argues that near-zero T-bill rates during much of the post-2008 period cut into managed futures returns, because these funds hold large T-bill balances and earned roughly 300-400 basis points less interest than they would have at normal rates.
- • The Innovator Equity Managed Floor ETF (SFLR) offers no protection against the first 10% of market decline but provides protection beyond that floor, funded by selling calls to pay for a ladder of puts.
- • SFLR has a beta of 0.61 and is expected to lag the S&P 500 in strong rallies because its short calls cap upside, a tradeoff the author says investors must accept in advance.
- • The author cites Gemini's analysis estimating SFLR would have fallen 30-35% in a 2000-2002-style prolonged decline versus about 50% for the S&P 500, while noting the fund could miss a sharp snapback depending on option expiration timing.
Summary
Managed futures offer diversification during equity downturns, but their recent performance has been weaker than their long-run track record suggests, according to an Investment Consultant column published October 27, 2026. Using Testfol.io, which can simulate the KMLM managed futures strategy back to 1987, the author compares KMLMsim with the S&P 500 and a 60/40 portfolio. The simulation shows KMLMsim diverging favorably from equities at most sharp negative turns. Since January 1, 2008, however, KMLMsim has compounded at 3.42% per year, versus 11.30% for SPY and 8.43% for a 60/40 mix.
The author attributes part of the shortfall to interest rates. He argues that when T-bill rates sat at or near zero for much of the period, managed futures funds, which hold substantial T-bill balances, forgone roughly 300-400 basis points of interest income. He says that industry contacts at AdvisorShares had dismissed this idea, and he disagrees. With T-bills yielding again, he notes that yield is not the only driver of returns. He also points to whipsaws and choppy markets as obstacles to the strategy, particularly over the 2023-2025 period.
The column also examines the Innovator Equity Managed Floor ETF (SFLR), which the author describes as neither a conventional buffer fund nor its inverse. SFLR provides no protection for the first 10% of decline and then protects against losses beyond that point. The fund implements this by selling calls and using the proceeds to fund a ladder of puts, according to its most recent fact sheet, which the author notes may be dated. With a beta of 0.61, SFLR is unlikely to keep pace with SPY in strong up markets, and its short calls cap upside. The author describes this as an expected feature rather than a flaw.
The author cites analysis from Gemini on SFLR's risks. In a long, drawn-out decline similar to 2000-2002, Gemini estimated SFLR would fall 30-35% versus about 50% for the S&P 500. However, as the market continues lower, newly purchased puts carry lower strike prices, and the 10% floor resets lower, reducing protection. Gemini also flagged a rapid decline followed by a sharp rebound as a scenario in which the fund could miss the recovery, depending on how that move aligns with call expiration. The author notes this has not occurred so far.
The author concludes that SFLR has performed well relative to expectations and that including such a fund can add decent upside while reducing portfolio volatility, provided investors understand it will not capture full upside. He cautions against relying entirely on floor or buffer structures and warns that investors may abandon such funds during prolonged declines if they lack realistic expectations. In his words, SFLR "might be a good fund, but it's not a riskless fund."
The author attributes part of the shortfall to interest rates. He argues that when T-bill rates sat at or near zero for much of the period, managed futures funds, which hold substantial T-bill balances, forgone roughly 300-400 basis points of interest income. He says that industry contacts at AdvisorShares had dismissed this idea, and he disagrees. With T-bills yielding again, he notes that yield is not the only driver of returns. He also points to whipsaws and choppy markets as obstacles to the strategy, particularly over the 2023-2025 period.
The column also examines the Innovator Equity Managed Floor ETF (SFLR), which the author describes as neither a conventional buffer fund nor its inverse. SFLR provides no protection for the first 10% of decline and then protects against losses beyond that point. The fund implements this by selling calls and using the proceeds to fund a ladder of puts, according to its most recent fact sheet, which the author notes may be dated. With a beta of 0.61, SFLR is unlikely to keep pace with SPY in strong up markets, and its short calls cap upside. The author describes this as an expected feature rather than a flaw.
The author cites analysis from Gemini on SFLR's risks. In a long, drawn-out decline similar to 2000-2002, Gemini estimated SFLR would fall 30-35% versus about 50% for the S&P 500. However, as the market continues lower, newly purchased puts carry lower strike prices, and the 10% floor resets lower, reducing protection. Gemini also flagged a rapid decline followed by a sharp rebound as a scenario in which the fund could miss the recovery, depending on how that move aligns with call expiration. The author notes this has not occurred so far.
The author concludes that SFLR has performed well relative to expectations and that including such a fund can add decent upside while reducing portfolio volatility, provided investors understand it will not capture full upside. He cautions against relying entirely on floor or buffer structures and warns that investors may abandon such funds during prolonged declines if they lack realistic expectations. In his words, SFLR "might be a good fund, but it's not a riskless fund."
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