Key Takeaways
- • The S&P 500 entered bear market territory in June 2022 after declining more than 20% from January highs, while the Nasdaq Composite has remained in bear territory for much of the year, driven by inflation concerns and aggressive Federal Reserve tightening.
- • Managed futures hedge funds have historically outperformed equities during bear markets and periods of market stress, exhibiting negative correlation to traditional equity and bond holdings—positioning them as non-correlated diversification tools in current market conditions.
- • The iMGP DBi Managed Futures Strategy ETF (DBMF) delivered a year-to-date return of 26.60%, demonstrating the performance potential of managed futures vehicles during volatile market environments.
- • Managed futures funds capture performance by investing in liquid U.S.-based futures contracts using trend-following strategies that can generate positive returns in both bull and bear markets, independent of equity market direction.
- • In a macroeconomic environment characterized by simultaneous pressure on equities and bonds—driven by inflation and Fed tightening—managed futures offer portfolio diversification across uncorrelated asset classes for institutional investors seeking alternative return streams.
Summary
Equity markets remain under significant pressure as of late June 2022, with the S&P 500 having entered bear market territory earlier in the month following a decline exceeding 20% from January peaks. The Nasdaq Composite has languished in bear territory throughout most of the year. Market volatility continues to be driven by macroeconomic data releases and Fed policy signals, with the Conference Board's report of declining consumer optimism for the second consecutive month triggering renewed selling pressure and erasing earlier session gains, according to reporting from the Wall Street Journal.
Eloise Goulder, head of global market, data, and positioning intelligence teams within equity trading at JPMorgan Chase, highlighted the uncertainty surrounding market timing, stating: "The question is when we hit a market bottom and when we get that turning point, and it's not necessarily straight away." This sentiment underscores the challenging environment facing traditional equity allocators as aggressive Federal Reserve tightening compounds inflationary pressures on both stock and bond valuations.
Within this context, managed futures hedge funds have emerged as a strategic hedge for institutional portfolios. Historically, managed futures have demonstrated measurable outperformance during bear markets and periods of equity stress, exhibiting negative correlation to traditional equity and fixed-income holdings. These funds employ trend-following strategies that invest in liquid U.S.-based futures contracts, enabling them to generate positive returns in both bull and bear market environments regardless of directional equity movements. The mechanistic nature of trend-following strategies provides convex payoff profiles that capitalize on market dislocations without reliance on traditional asset class performance.
The iMGP DBi Managed Futures Strategy ETF (DBMF) exemplifies this opportunity, achieving a year-to-date return of 26.60% through June 2022. DBMF is structured to replicate hedge fund managed futures strategies while offering the cost efficiency, liquidity, and transparency of an ETF wrapper. The fund targets long-term capital appreciation through systematic exposure to trending markets across multiple asset classes, providing portfolio diversification benefits in an environment where conventional 60/40 allocations face simultaneous equity and bond headwinds. For sophisticated investors navigating elevated macro uncertainty and persistent inflation, managed futures strategies represent a non-correlated performance opportunity capable of enhancing risk-adjusted portfolio returns.
Eloise Goulder, head of global market, data, and positioning intelligence teams within equity trading at JPMorgan Chase, highlighted the uncertainty surrounding market timing, stating: "The question is when we hit a market bottom and when we get that turning point, and it's not necessarily straight away." This sentiment underscores the challenging environment facing traditional equity allocators as aggressive Federal Reserve tightening compounds inflationary pressures on both stock and bond valuations.
Within this context, managed futures hedge funds have emerged as a strategic hedge for institutional portfolios. Historically, managed futures have demonstrated measurable outperformance during bear markets and periods of equity stress, exhibiting negative correlation to traditional equity and fixed-income holdings. These funds employ trend-following strategies that invest in liquid U.S.-based futures contracts, enabling them to generate positive returns in both bull and bear market environments regardless of directional equity movements. The mechanistic nature of trend-following strategies provides convex payoff profiles that capitalize on market dislocations without reliance on traditional asset class performance.
The iMGP DBi Managed Futures Strategy ETF (DBMF) exemplifies this opportunity, achieving a year-to-date return of 26.60% through June 2022. DBMF is structured to replicate hedge fund managed futures strategies while offering the cost efficiency, liquidity, and transparency of an ETF wrapper. The fund targets long-term capital appreciation through systematic exposure to trending markets across multiple asset classes, providing portfolio diversification benefits in an environment where conventional 60/40 allocations face simultaneous equity and bond headwinds. For sophisticated investors navigating elevated macro uncertainty and persistent inflation, managed futures strategies represent a non-correlated performance opportunity capable of enhancing risk-adjusted portfolio returns.
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