Deep Dive: These four funds are 2022 winners. They use a hedge fund-like strategy

Funds that follow managed futures strategies have been outperforming benchmark indexes by a wide margin this year. They tend to have different approaches and can be risky. But for a typical investor with a majority of assets invested in the stock market, having a modest portion allocated to managed futures can lower overall portfolio risk,…


Funds following managed futures strategies outperformed benchmark indexes by a large margin this year.

They have different approaches, and can be risky. However, for an investor who has a large amount of assets in the stock markets, having a small portion of your portfolio allocated to managed futures can reduce overall portfolio risk according to Mike Loewengart (Managing Director of Investment Strategy for E-Trade at Morgan Stanley).

A managed futures strategy allows a money manager to move in and out of different asset classes including currencies, stocks, and bonds across geographies. They can also use long and short positions to profit from market trends.

Managers don’t have a crystal ball, but they can jump on or off of a pricing trend, if it is early enough. This can cause performance to be different from the wider stock market.

During an interview, Loewengart said: “There is no doubt that in recent months we have seen more interest in managed futures funds, and more specifically the commodities space in general.”

Managed futures is a type of “liquid alternative” strategy that wasn’t available to most investors until about 10 years ago, when mutual funds began to employ the strategy, Loewengart explained.

“Before that, it was necessary to find a private vehicle,” Loewengart explained. This meant that you would have to be able to meet the minimum account requirements for a hedge fund.

” After years and years of watching diversified portfolios fall because they could not keep up with large-cap stocks, it is encouraging that these strategies are proving to be a value for investors.” he said.

Four managed futures funds

First, look at this year’s performance for four funds that employ managed futures strategies compared with the benchmark S&P 500 Index
+2. 39%

through May 12:


All four of the managed futures funds have produced gains this year as the S&P 500 has dropped 17% (with dividends reinvested). The best performer is up 32%.

It’s important that you review longer periods of time. This is

for two years.


Now you can see that through a longer period, all five approaches have been viable, with the S&P 500 soaring to the greatest heights before falling to the middle of the pack.

Here’s a breakdown of the four funds:

  • The iMGP DBi Managed Futures Strategy ETF
    +1. 30%

    The only exchange traded fund on this list. It is actively managed and aims to provide access to hedge-fund-like strategies to achieve long-term capital growth at relatively low fees. See this ETF Wrap column for Christine Idzelis’ interview with Andrew Beer of Dynamic Beta investments (DBi).

  • The AlphaSimplex Managed Futures Strategy Fund
    +0. 53%

    It uses different asset models to take short and long positions across all asset types. This is what it calls an “absolute returns strategy”. It is included on the E-Trade from Morgan Stanley All-Star Mutual Funds list.

  • The Pimco Trends Managed Futures Strategy Fund
    -0. 29%

    Also, the strategy is designed to capitalize on price momentum across asset types to generate positive returns “especially during equity market downturns.”

  • The Standpoint Multi-Asset Fund
    +1. 68%

    follows a hybrid approach — it is about 50% invested in long equity and bond positions (mostly stocks) through a group of ETFs, with the rest invested per a managed futures strategy, long and short, across asset types. The strategy’s performance over the past two years is evident in the chart. You can read more about the fund here. Eric Crittenden, co-manager for the Standpoint Multi-Asset Fund wrote in an email that he had increased his short exposure to bonds and increased his long exposure to the dollar relative to other currencies. He also decreased his “significant” long-term exposure to commodities and increased his “modest” long-term exposure to energy markets. “Stagflation is the theme of this article, and it isn’t expected to be easy or enjoyable. He wrote that it is the most difficult market environment to navigate for investors.

  • There are multiple share classes in the three mutual funds mentioned above, excluding DBMF. These charts display the institutional share classes with the lowest account minimums and expenses. Some brokers can offer institutional shares to customers with lower account minimums.

Loewengart said the Class A (or Investor Class) shares for the funds are available without sales charges at E-Trade and most other large brokers, even though the prospectuses might list sales charges.

The Class A tickers for the mutual funds are:

Avoid ‘performance-chasing’

“My concern is about performance-chasing. Loewengart stated that investors may be influenced by recent results and not fully aware of the risks.

Chasing performance is another factor that affects equity strategy investors. They might move money into “last year’s best-performing stock fund,” without considering that

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