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ETF Wrap: Managed futures are like pigs buried in mud: An ETF manager uses hedge-fund strategies to make big gains this year as bonds and stocks drop

Hello! Market jitters remain high this week as stocks continue to slide, with Cathie Wood’s ARK Innovation ETF standing out in the recent carnage.“We’ve entered a new era that is going to really challenge a lot of the ways people were making money,” says Andrew Beer of Dynamic Beta investments, or DBi. In this week’s…

. Hello! Stocks continue to fall and market jitters are high. Cathie Wood’s ARK Innovation ETF stands out among the chaos.

“We have entered a new era which is going to challenge a lot a people’s ways of making money,” states Andrew Beer, Dynamic Beta Investments (DBi). Beer is the co-portfolio manager for the iMGP DBi Managed Futures Strategy ETF.
DBMF,
+1. 30%
,
talks about the strategy behind the fund’s double-digit gains so far in 2022.

Please send tips and feedback to christine.idzelis@marketwatch.com. You can also follow me on Twitter at @cidzelis and find me on LinkedIn.

Turbulent markets can be a severe blow to portfolios. However, one sector of the exchange-traded funds industry seems to be doing well despite investor anxiety about rising rates and high inflation.

. Managed futures, a quantitative-based strategy that capitalizes on market trends by placing long and short bets in futures contracts in commodities rates, currencies, and equities, is enjoying a strong run according to Andrew Beer.
DBMF,
+1. 30%

Dynamic Beta investments.

. This strategy is often associated with the hedge-fund industry.

This year managed futures feel like pigs in the mud,” Beer stated in a telephone interview. He said that managed futures are happy because they have many ways to make money in a market that has seen both bonds and stocks lose this year.

. Dynamic Beta Investments, or DBi is replicating managed-futures strategies used by hedge funds but charging lower fees to offer its investment strategy via an ETF. Beer reports.

Shares of the iMGP DBi Managed Futures Strategy ETF have jumped 23.5% this year through Wednesday, according to FactSet data. That compares with a 14% gain for the First Trust Managed Futures Strategy Fund
FMF,
+0. 06%

Over the same period, shares of WisdomTree Managed Futures Strategy Fund saw a 0.6% increase
WTMF,
+0. 96%
,
FactSet data show.

By contrast, shares of the SPDR S&P 500 ETF Trust
SPY,
+2. 39%
,
which tracks U.S. stocks, have tumbled around 17% this year through Wednesday, while the iShares Core U.S. The Aggregate Bond ETF
AGG,
-0. 43%

has fallen almost 10%, according to FactSet data.

Beer said the iMGP DBi Managed Futures Strategy ETF, which has around $175 million of assets, runs hedge fund performance data from the SG CTA Index through a “sophisticated risk model” that tells DBi which positions are driving returns.

“Every Monday we rebalance the portfolio,” he said, adding that the ETF may outperform hedge funds “by a wide margin by cutting out fees.”

Last month the iMGP DBi Managed Futures Strategy ETF gained 10.6%, beating the SG CTA Index’s 5.8% return, according to data provided by Beer.

“Hedge funds have a lot of alpha, but it usually goes to managers, and not clients,” Beer said, explaining that fees take a large chunk of returns. He stated that DBi’s managed-futures ETF charges a 0. 85% fee.

The U.S. stock market is having another tough week and all three major stock benchmarks — the S&P 500
SPX,
+2. 39%
,
Dow Jones Industrial Average
DJIA,
+1. 47%

Nasdaq Composite
COMP,
+3. 82%

— are down so far this month after a brutal April. Shares of the SPDR S&P 500 ETF Trust have sunk more than 4% in May, while the iMGP DBi Managed Futures Strategy ETF is up nearly 1%, FactSet data show, at last check. We’ve entered an era that will really challenge many of the ways people were making their money.” Beer said. This is due to rising interest rates as Federal Reserve tightens monetary policy to control inflation.

Read: U.S. wholesale inflation slows in April, but prices still up 11% in the past year

“This is going to be a wake up call for a lot of investors who during the 2010s didn’t realize how easy it was,” he said. “The more grizzled, experienced macro investors both look at this as one of the most dangerous and fraught markets they’ve seen but also one that’s ripe with opportunity.”

Fifteen ETFs are trading more than 30% below their 200-day moving averages, according to a note from Instinet’s Frank Cappelleri that was emailed Wednesday after the stock market’s close. Cathie Wood’s flagship ARK Innovation TF is at the top.
ARKK,
+11. 82%
,
The Renaissance IPO ETF was next
IPO,
+9. 17%
,
Amplify Transformational data sharing ETF
BLOK,
+6. 77%
,
AdvisorShares Pure U.S. Cannabis Stock ETF
MSOS,
+4. 71%
,
SPDR S&P ETF for biotech ETF
XBI,
+5.68%
.


INSTINET NOTE FROM MAY 11, 2022

As usual, here’s your week-end look at top and bottom ETF performers from the week ending Wednesday, according FactSet data.

The good…
Best Performers

%Performance

Vanguard Extended-Duration Treasury ETF
EDV,
-2. 06%
2.6

iShares 20+ Year Treasury Bond ETF
TLT,
-1. 48%
2.2

Vanguard Long-Term Treasury ETF
VGLT,
-1. 39%
2.0

SPDR Portfolio Long-Term Treasury ETF
SPTL,
-1. 42%
2.0

iShares 10-20 Year Treasury Bond ETF
TLH,
-0. 95%
1.7

Source: FactSet, through Wednesday May 11, 2022 excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater

…the bad
Weekly ETF reads:

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