Key Takeaways
- • Managed-futures funds have underperformed significantly over the past three years, with the typical systematic trend-following fund declining 2.3% annualized through August 31, 2025, versus 12.6% annualized gains for traditional broad-market balanced index funds like Vanguard Balanced Index VBIAX.
- • Year-to-date performance through August 2025 shows managed-futures strategies down 3.6%, with the first-half tariff-driven market selloff inflicting a particularly severe 5.8% loss before a modest recovery in the latter half of the year.
- • Trend-following strategies struggle in choppy, directionless market environments with frequent whipsaws across asset classes, with faster-moving models like Virtus AlphaSimplex Managed Futures AMFAX posting outsized losses of 16.2% as of August 2025 due to rapid repositioning during sudden inflection points.
- • Managed-futures strategies operate by using highly liquid global futures markets to capitalize on directional trends across commodities, currencies, and stock indexes, with the ability to quickly enter and exit positions across multiple asset classes.
- • Historical evidence suggests these strategies provide meaningful diversification benefits during market dislocations, inflationary shocks, and rising-rate environments—a value proposition best evaluated over longer time horizons rather than recent underperformance.
Summary
Managed-futures funds, which employ systematic trend-following strategies across global futures markets, have faced a pronounced headwind in recent market conditions. Over the three-year period through August 31, 2025, the typical fund in Morningstar's systematic trend category posted an annualized loss of 2.3%, a stark contrast to the 12.6% annualized return achieved by traditional balanced index funds such as Vanguard Balanced Index VBIAX. Year-to-date performance tells an equally challenging story, with the category down 3.6% through August 2025, despite a partial recovery in the second half of the year that provided some offset to the severe first-half decline.
The most acute pressure came during the first half of 2025, when tariff-related market turbulence triggered a 5.8% loss for the category. This performance shock underscores the fundamental challenge facing trend-following strategies: they rely on sustained directional price movements across major asset classes to generate returns. In environments characterized by choppy, choppy price action and rapid market reversals—precisely the conditions created by tariff volatility and subsequent whipsaws—these strategies face structural headwinds. The dispersion of performance within the category illustrates this dynamic. Faster-moving systematic models, exemplified by Virtus AlphaSimplex Managed Futures AMFAX, which incorporates shorter-term underlying models designed for rapid repositioning, posted losses of 16.2% through August 2025. While such responsiveness theoretically permits quick adaptation to sudden market dislocations, in practice these models lag slower-moving peers during sharp market inflection points and extended periods of back-and-forth trading.
Managed-futures strategies operate by deploying capital across highly liquid global futures markets spanning commodities, currencies, and equity indexes. This operational structure enables managers to maintain broad geographic and sectoral diversification while maintaining the liquidity necessary for tactical repositioning. Historically, these strategies have demonstrated particular value during market dislocations, inflationary shocks, and rising-rate environments—periods when traditional equity and bond portfolios face synchronized headwinds. The diversification benefit stems from the strategies' ability to profit from trend movements that may diverge from conventional equity-bond correlations. However, recent performance challenges have tested investor patience, highlighting the importance of evaluating trend-following strategies over sufficiently long time horizons to capture multiple market regimes rather than focusing exclusively on recent underperformance.
The most acute pressure came during the first half of 2025, when tariff-related market turbulence triggered a 5.8% loss for the category. This performance shock underscores the fundamental challenge facing trend-following strategies: they rely on sustained directional price movements across major asset classes to generate returns. In environments characterized by choppy, choppy price action and rapid market reversals—precisely the conditions created by tariff volatility and subsequent whipsaws—these strategies face structural headwinds. The dispersion of performance within the category illustrates this dynamic. Faster-moving systematic models, exemplified by Virtus AlphaSimplex Managed Futures AMFAX, which incorporates shorter-term underlying models designed for rapid repositioning, posted losses of 16.2% through August 2025. While such responsiveness theoretically permits quick adaptation to sudden market dislocations, in practice these models lag slower-moving peers during sharp market inflection points and extended periods of back-and-forth trading.
Managed-futures strategies operate by deploying capital across highly liquid global futures markets spanning commodities, currencies, and equity indexes. This operational structure enables managers to maintain broad geographic and sectoral diversification while maintaining the liquidity necessary for tactical repositioning. Historically, these strategies have demonstrated particular value during market dislocations, inflationary shocks, and rising-rate environments—periods when traditional equity and bond portfolios face synchronized headwinds. The diversification benefit stems from the strategies' ability to profit from trend movements that may diverge from conventional equity-bond correlations. However, recent performance challenges have tested investor patience, highlighting the importance of evaluating trend-following strategies over sufficiently long time horizons to capture multiple market regimes rather than focusing exclusively on recent underperformance.
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